UNIVERSITY  OF  CALIFORNIA 

AT    LOS  ANGELES 


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UNIVERSITY  OF  €ALiFOR^SrA 


i 


61ST  CONGRESS  :  :  2d  SESSION 


1909-1910 


SENATE  DOCUMENTS 


Vol,  10 


WASHINGTON  :  ;  GOVERNMENT  PRINTING  OFFICE  :  :  lOln 


6l8T  Congress  \  hvkat'v  (Document 

2d  Session     ]  b-b.JNAiii.  |    No.  400 


NATIONAL  MONETARY  COMMISSION 


The 
National  Bank  of  Belgium 


By 
CHARLES    A.  CONANT 

Author  o(  "a  History  of  Modern   Banks  of  Issue' 


Washington  :  Government  Printing;  (Office  :  1910 


NATIONAL  MONETARY  COMMISSION. 


Nblson  W.  Aldrich,  Rhode  Island,  Chairman. 

Edward  B.  Vreeland,  New  York,  Vice-Chairman. 
Jm,ius  C.  Burrows,  Michigan.  Jbsse  Overstreet,  Indiana. 

Eugene  Hale,  Maine.  John  W.  Weeks,  Massachusetts. 

Philander  C.  Knox,  Pennsylvania.  Robert  W.  Bonynge,  Colorado. 

Theodore  E.  Burton,  Ohio.  Sylvester  C.  Smith,  California. 

John  W.  Daniel,  Virginia.  Lemuel  P.  Padgett,  Tennessee. 

Henry  M.  Teller,  Colorado.  George  F.  Burgess,  Texas. 

Hernando  D.  Money,  Mississippi.  Arsenb  P.  Pujo,  Louisiana. 

Joseph  W.  Bailey,  Texas.  Arthur  B.  Shelton.  Secretary, 

A.  Piatt  Andrew,  Special  Assistant  to  Commission. 


3/OG 


TABLE   OF   CONTENTS. 


Page. 

General  summary 5 

Origin  and  history  of  the  Bank ii 

The  question  of  a  state-owned  bank 28 

Character  of  business  permitted  and  forbidden 37 

Volume  and  character  of  discounts 44 

Advances  on  public  funds 54 

Losses  and  rejected  paper 58 

Discount  policy  of  the  National  Bank 60 

The  gratuitous  issue  of  drafts 65 

Movements  of  the  circulation 68 

Regulation  of  the  note  circulation 73 

Foreign  bills  in  the  reserve 79 

The  question  of  monopoly  of  note  issue 85 

Methods  of  collecting  paper 89 

Current  accounts 92 

The  custody  of  securities 98 

Management  of  the  Bank 102 

Internal  organization  and  personnel 108 

Branches  and  discount  offices 115 

Changes  in  capital  and  surplus 120 

Earnings  and  dividends 127 

Share  of  the  State  in  the  profits  of  the  Bank 131 

Services  performed  by  the  Bank  for  the  State 142 

Investments  on  behalf  of  the  treasury 156 

Services  performed  for  the  General  Savings  Bank 157 

The  monetary  experience  of  Belgium — 163 

The  metallic  reserve  and  the  premium  on  exchange 179 

General  statistics  of  banking  operations 192 


APPENDICES. 

Appendix  A. — The  Exchange  Problem  in  Belgium 201 

B. — The    Fundamental    Laws    Creating    and    Extending 

the  Charter  of  the  Bank 203 

C. — Law  Regulating  the  Functions  of  Cashier  for  the 

State 213 

D. — Statutes  of  the  Bank 216 


THE   NATIONAL   BANK   OF   BELGIUM. 

GENERAL   SUMMARY. 

The  history  of  the  National  Bank  of  Belgium  is  of  spe- 
cial interest  to  the  student  of  banking  systems  because 
of  the  lateness  of  its  foundation  and  the  ability  of  its 
founders  to  garner  up  the  results  of  the  experience  of 
Belgium  and  of  other  countries  in  what  they  conceived 
to  be  the  best  attainable  form  of  organization.  Founded 
under  these  conditions  in  1850,  twenty  years  after  Bel- 
gium became  an  independent  State,  the  charter  of  the 
National  Bank  is  free  from  many  of  those  temporary  and 
local  features  which  influenced  the  foundation  and  de- 
velopment of  some  of  the  other  great  banks  of  Europe. 
It  bears  the  stamp  of  the  two  or  three  characteristics 
which  are  regarded  by  many  economic  students  as  be- 
longing to  the  ideal  bank  of  issue. 

The  business  of  the  Bank  is  limited  substantially  to  the 
discount  of  commercial  paper  and  excludes,  except  to  a 
limited  extent,  advances  upon  securities  or  any  other 
noncommercial  asset.  Even  such  securities  as  are  ad- 
mitted as  investments  for  the  reserve  fund  or  as  the  cover 
for  a  restricted  amount  of  loans  are  securities  issued  by 
the  Government  of  Belgium  or  under  its  guaranty.  In 
dealing  with  commercial  paper,  the  function  of  the  Bank 


National     Monetary     Commission 

is  essentially  that  of  rediscounting  for  the  joint-stock 
banks  and  for  local  discount  committees  paper  which  has 
been  originally  discounted  with  them.  This  affords  to 
the  Bank  the  guaranty  of  third  parties  for  the  ultimate 
payment  of  paper  discounted  and  adds  to  the  liquid  char- 
acter of  the  assets  by  reducing  to  the  neighborhood  of 
forty  days  the  period  for  which  paper  has  to  run  after 
reaching  the  Bank. 

Upon  this  basis  of  quickly  convertible  commercial  paper 
is  based  the  system  of  note  issue  of  the  Bank.  This  issue 
is  unlimited  in  amount  and  is  not  restricted  by  the  char- 
ter even  as  to  the  proportion  of  cash  reserve  required  to 
be  held.  The  proportion  of  reserve  was  deliberately  left 
to  be  fixed  by  the  statutes  of  the  Bank,  which  are  a  sub- 
ject of  mutual  agreement  between  the  Minister  of  Finance 
and  the  administration  of  the  Bank.  By  this  authority 
the  proportion  of  cash  to  notes  has  been  fixed  at  33  >^  per 
cent,  but  the  Minister  of  Finance  has  power  to  suspend 
this  requirement  in  an  emergency.  Foreign  bills  of  ex- 
change have  long  been  counted  as  the  equivalent  of  gold 
in  the  reserve  and  have  proved  useful  on  critical  occasions 
in  maintaining  control  of  the  exchanges. 

Interest  is  not  paid  upon  deposits  in  the  National  Bank, 
in  order  that  such  deposits  as  are  attracted  shall  be  those 
growing  out  of  commercial  operations  and  not  those  par- 
taking of  the  nature  of  investments  made  for  the  sake  of 
the  interest  earned.  The  outstanding  issues  of  notes, 
which  reached  in  1908  an  amount  in  excess  of  800,000,000 
francs  ($160,000,000)  for  a  population  of  less  than  7,500,- 
000,  constitute  the  chief  liability  of  the  Bank.  Current 
deposit  accounts  constitute  only  about  one-tenth  of  the 


National      Bank        of     Belgium 

assets  of  about  i  ,000,000,000  francs  ($200,000,000) ,  which 
represent  the  banking  and  issuing  functions  of  the  Bank.** 

Regulation  of  the  money  market  is  attained  in  part,  as 
in  other  European  countries  dowered  with  a  central  bank 
of  issue,  by  changing  the  discount  rate.  The  problem  of 
money  and  exchange  in  Belgium  has  been  complicated  by 
the  large  amount  of  silver  coins  which  were  issued  before 
the  suspension  of  free  coinage  by  the  Latin  Union  in  1873, 
and  by  the  fact  that  this  silver  has  degenerated  into  the  posi- 
tion of  a  token  coin,  kept  at  gold  par  largely  through  the 
control  exercised  by  the  National  Bank  over  exchange. 
Gold  has  practically  disappeared  from  circulation,  partly 
by  reason  of  the  issue  of  notes  in  large  amounts  down  to 
the  denomination  of  20  francs  ($3.86),  and  partly  as  the 
result  of  some  hesitation  on  the  part  of  the  Bank  to  raise 
the  discount  rate  sharply  to  offset  the  adverse  current  of 
exchange.  The  Bank  has  preferred  to  a  large  extent  the 
policy  of  the  Bank  of  France,  of  replenishing  its  gold 
reserve  at  its  own  expense  rather  than  by  the  elevation  of 
the  discount  rate. 

The  organization  of  the  National  Bank  of  Belgium  is 
not  unlike  that  of  the  Banks  of  France  and  Germany. 
The  governor  of  the  Bank  is  appointed  by  the  King;  but 
the  Government  has  no  share  in  the  ownership,  and  the 
administrative  boards  are  chosen  by  the  shareholders. 
The  State  has  kept  its  hands  clean  from  dipping  into  the 
resources  of  the  Bank  by  loans,  but  it  has  from  time  to 
time,  with  the  renewal  of  the  charter,  added  to  the  burdens 


o  While  the  franc  is  taken  in  these  generalizations  at  20  cents,  definite 
sums  are  reduced  in  this  treatise  more  nearly  lo  tlie  exact  equivalent  at 
19.3  cents  to  the  franc,  without,  however,  carrying  out  the  calculations  to 
the  last  decimals. 


National    Monetary     Commission 

imposed  upon  the  Bank  by  way  of  gratuitous  services  and 
taxation.  The  Bank  was  organized  with  the  view  of  per- 
forming the  fiscal  functions  of  the  treasury,  and  its  39 
agencies  have  been  distributed  in  the  chief  places  of  Bel- 
gium as  much  to  facilitate  this  end  as  for  the  convenience 
of  the  commercial  community.  So  considerable  is  the 
work  performed  for  the  State  that  payments  in  and  out 
of  the  bank  for  the  public  treasury  have  come  to  exceed 
5,000,000,000  francs  ($1,000,000,000)  annually,  exclusive 
of  the  many  other  operations  in  the  payment  of  coupons 
and  conversion  of  the  debt  which  have  been  imposed  with- 
out compensation  upon  the  Bank. 

In  addition  to  these  direct  fiscal  services,  the  National 
Bank  undertook  at  the  time  of  its  foundation  to  carry  on 
a  large  part  of  the  business  of  the  savings  bank,  if  one 
should  be  created.  Such  an  institution  was  created  in 
1865  and  has  grown  until  the  total  amount  of  deposits  is 
not  far  below  the  assets  of  the  National  Bank.  While 
the  detail  of  the  small  deposits  is  not  handled  by  the 
National  Bank,  investments  for  the  savings  bank  itself 
and  for  its  clients,  the  maintenance  of  its  cash  balance, 
and  the  remittance  of  its  funds  are  all  performed,  practi- 
cally without  compensation,  by  the  National  Bank. 

When  the  National  Bank  was  created  in  1850,  it  was  to 
meet  a  dire  need  on  the  part  of  the  Government  for  a 
fiscal  agent.  The  burdens  of  taxation  at  first  imposed 
were,  therefore,  comparatively  light;  but  with  the  renewals 
of  the  charter  in  1872  and  in  1900,  the  grip  of  the  State 
upon  the  pocket  of  the  bank  was  tightened.  A  tax  has 
been  imposed  since  1872  amounting  to  one-half  of  i  per 
cent    annuallv    on    the   excess   of   the   circulation    above 


National      Bank      of      Belgium 

275,000,000  francs.  The  policy  of  covering  into  the  pubhc 
treasury  a  large  share  of  the  profits  took  the  form  of  two 
requirements  in  1872,  which  were  made  much  more 
exacting  in  1900.  One  of  these  was  the  provision  that  a 
percentage  of  the  net  profits  should  be  paid  into  the  public 
treasury.  Under  the  law  of  1872  this  division  of  profits 
did  not  begin  until  the  shareholders  had  received  dividends 
of  6  per  cent,  after  which  one-fourth  of  the  net  excess 
went  to  the  State.  By  the  law  of  1900,  the  point  at 
which  division  with  the  State  should  begin  was  reduced 
to  a  dividend  rate  of  4  per  cent.  Under  the  earlier  law 
the  excess  of  receipts  from  discount  above  a  rate  of  5  per 
cent  went  into  the  public  treasury.  By  the  later  law  the 
Bank  can  not  profit  from  a  discount  rate  above  ^H  P^r 
cent.  To  the  latter  provision  is  attributed  by  some  the 
disposition  of  the  Bank  in  recent  years  to  prefer  to  derive 
a  profit  from  its  note  circulation,  at  the  expense  of  un- 
favorable foreign  exchanges,  rather  than  to  raise  the 
discount  rate  radically  in  order  to  protect  its  gold  reserve 
and  the  monetary  stock  of  Belgium. 

This  in  outline  is  the  history  of  the  development  of  the 
National  Bank  of  Belgium,  which  is  set  forth  more  in 
detail  in  the  following  pages.  The  subjects  of  banking 
theory  and  practice  have  been  more  thoroughly  discussed 
in  Belgium  than  in  some  other  countries,  because  each  re- 
newal of  the  charter  of  the  National  Bank  has  been  for 
nearly  thirty  years,  the  last  renewal  continuing  the  life 
of  the  bank  to  January  i,  1929.  This  has  led  perhaps  to 
a  more  thorough  examination  of  the  questions  involved 
than  where  charters  nm  for  shorter  terms  and  proposals 
for  renewal  fall  more  within  the  channels  of  routine.     At 


National    Monetary     Commission 

the  time  of  the  renewal  of  the  charter  of  the  National 
Bank  in  1900  the  reports  alone  of  the  various  committees 
filled  a  folio  volume  of  619  pages  and  the  debates  in  the 
Chambers  a  still  greater  space. 

Interest  was  given  to  the  debate  by  the  presence  in  the 
Belgian  Chamber  of  Deputies  of  some  of  the  most  scholarly 
and  advanced  advocates  of  state  sociaUsm,  who  made  a 
determined  onslaught  upon  the  organization  of  the  Bank. 
Hardly  a  voice  was  raised,  however,  against  the  theory 
of  a  central  bank  organized  to  regulate  the  exchanges  or 
against  the  system  of  note  issue  under  which  the  Bank  had 
operated  for  forty  years.  The  criticisms  of  the  Socialist 
deputies  were  directed  rather  to  the  questions  of  the  terms 
of  the  charter,  ownership  of  the  Bank  by  private  indi- 
viduals rather  than  by  the  State,  and  the  proportion  of 
profits  earned  which  should  be  covered  into  the  public 
treasury. 

The  principal  sources  of  authority  are  the  records  of 
the  Bank  itself,  in  its  carefully  prepared  annual  reports, 
and  the  docmnents  and  proceedings  relating  to  the 
renewal  of  the  charter  in  1872  and  in  1900.  The  reports 
submitted  on  these  occasions  and  the  complete  debates 
in  the  Chambers  are  printed  in  separate  volumes  and  afford 
a  mine  of  information  as  to  the  operations  of  the  Bank 
and  its  relation  to  Belgian  enterprise.  The  Ust  of  author- 
ities cited  in  various  parts  of  this  document  appears  below. 
The  parliamentary  records  are  cited  throughout  the  text 
simply  under  the  designations  "  Documents  Parlemen- 
taires"  or  "Discussions  Parlementaires,"  with  the  date, 
without  specifying  the  fact  that  they  are  the  documents 
relating  exclusively  to  the  National  Bank,  since  parHa- 


National      Bank       of      Belgium 

mentary  documents  or  discussions  on  other  subjects  are 
not  cited  in  this  report.  The  documents  used  are  as 
follows : 

Banque  Nationale  de  Belgique;  Documents  Officiels,  Relatifs  a  la 

Prorogation  de  cette  Institution,  decr^tee  par  la  loi  du   20  Mai 

1872;  Brussels,  1872. 
Banque  Nationale  de  Belgique:  Loi  du  26  Mars  1900,  Documents 

Parlementaires;  Brussels,  1901. 
Banque  Nationale  de  Belgique:  Loi  du  26  Mars  1900,  Discussions 

Parlementaires;  Brussels,  1901. 
Banque  Nationale  de  Belgique,   Assembl^e  G^nerale  des  Action- 

naires,  Annual  Reports,  1 892-1 908. 
Banque  Nationale  de  Belgique,   Lois  Organiques,  Statuts,   R^gle- 

ment  d'Ordre  Int^rieur;  Brussels,  1907. 
Annuaire  Statistique  de  la  Belgique,  1907;  Brussels,  1908. 
Moniteur  des  Int^rets  Materiels  (tri-weekly),  Brussels. 
Les  Banques  d'Emission  en  Europe:  Octave  Noel,  Paris,  1888. 
Les  Banques  d'Emission:  Etude  Historique  et  de  Legislation  Com- 

par^e:  Robert  Ulens,  Brussels,  1908. 
Bank  Rate  and  the  Money  Market  in  England,  France,  Germany, 

Holland,   and   Belgium:  R.   H.   Inglis  Palgrave,  F.   R.   S.,   New 

York,  1903. 
A  History  of  Banking  in  all  the  Leading  Nations;  edited  by  the 

editor  of  the  Journal  of  Commerce,  New  York,  1896. 
A  History  of  the  Latin  Monetary  Union:    Henry  Parker  WiUis, 

Chicago,  1 90 1 
A  History  of  Modern  Banks  of  Issue:  With  an  Account  of  the 

Economic  Crises  of  the  Nineteenth  Century  and  the  Crisis  of 
1907:  Charles  A.  Conant,  New  York,  1909. 

ORIGIN    AND    HISTORY    OF   THE    BANK. 

The  creation  of  the  National  Bank  of  Belgium  was  one 
of  the  consequences  of  the  separation  of  Belgium  from 
Holland  in  1830,  and  of  the  unsatisfactory  condition  of 
banking  which  followed  the  separation.  It  was  only 
after  experiments  for  twenty  years  with  existing  institu- 


National     Monetary     Commission 

tions,  which  did  not  operate  satisfactorily  as  banks  of 
ssiie  nor  as  agents  of  the  treasury,  that  the  National 
Bank  was  created  in  1850.  The  charter  adopted  follow^ed 
simple  lines  for  keeping  the  Bank  free  from  entangle- 
ments by  restricting  its  field  of  operations  to  the  dis- 
counting of  commercial  paper  based  upon  actual  trans- 
actions.** So  directly  and  effectively  was  it  aimed  at 
these  results  that  it  became  the  model  of  at  least  two 
foreign  countries  in  the  reconstruction  of  their  banking 
systems.  When  the  Government  of  Holland  remodeled 
the  charter  of  the  Bank  of  the  Netherlands  in  1864,  the 
new  law  w^as  based  upon  that  of  Belgium.  It  was  declared 
by  M.  Betz,  the  Netherlands  Minister  of  Finance  :*• 

"  If  one  wished  to  qualify  definitely  by  a  foreign  name 
the  system  adopted  by  the  Government,  one  would  be 
near  the  truth  in  saying  that  while  the  French,  Scotch, 
and  American  systems  have  been  rejected,  the  Belgian 
system  has  been  chosen." 

In  the  reform  of  the  currency  system  of  Japan,  also  in 
1882,  Count  Matsukata,  the  eminent  Minister  of  Finance, 
set  forth  in  his  report  on  the  subject:  = 

"  In  point  of  the  perfectness  of  organization  and  the  well- 
regulated  condition  of  business  management,  the  National 
Bank  of  Belgium  stands  highest.  This  fact  is  due  doubt- 
less to  the  lateness  of  its  fotmding,  which  enabled  it  to 

«It  was  declared  in  the  report  of  M.  Descamps  to  the  Senate  in  1900, 
that  while  the  Belgian  system  had  nothing  to  fear  but  everything  to  gain 
from  an  analysis  of  its  principles,  it  was  proper  to  recall  "that  it  had  not 
been  presented  to  the  country  as  the  work  of  a  social  reformer,  as  a  system 
formulated  a  priori  under  the  Empire  of  preconceived  economic  doctrines, 
'sprung  full  armed  from  the  head  of  Jupiter,'  but  had  been  derived  from  the 
simple  lessons  of  experience." — Documents  Parlementaires :   1900,  p.  352 

^  Documents  Officiels:   1872,  p.  46. 

c  Report  on  the  Adoption  of  the  Gold  Standard  in  Japan,  p.  64. 


National      Bank       of      Belgium 

consider  fully  the  mistakes  as  well  as  the  successes  of 
older  banks.  Its  regulations  are  for  this  reason  more 
perfect  than  those  of  any  others,  winning  highest  praises 
from  the  financiers  of  the  world,  and  leading  the  Bank  of 
Amsterdam,  at  the  time  of  its  organization,  to  closely 
follow  its  pattern.  In  the  case  of  a  Japanese  central 
bank,  therefore,  no  better  pattern  can  be  found  than  the 
National  Bank  of  Belgium;  and  if  the  regulations  thus 
copied  are  modified  to  suit  our  peculiar  conditions  and 
circumstances,  I  have  little  doubt  that  the  system  thus 
adopted  will  perfectly  meet  our  present  need,  and  that  also 
in  point  of  practical  organization  it  will  prove  to  be  a 
success." 

There  were,  at  the  time  of  the  creation  of  the  National 
Bank  in  1850  four  banking  institutions  in  Belgium — the 
Societe  Generale,  the  Bank  of  Belgium,  the  Bank  of 
Flanders,  and  the  Bank  of  Liege. "  The  Societe  Generale 
with  a  capital  of  50,000,000  florins  (about  $20,000,000), 
dated  from  early  in  the  nineteenth  century,  and  under 
the  Dutch  sovereignty  performed  most  of  the  financial 
operations  of  the  Government.  The  control  of  the 
institution  was  chiefly  in  the  hands  of  the  Dutch  element, 
who  felt  little  sympathy  with  the  new  political  regime 
in  Belgium.  The  new  Government  was  compelled,  how- 
ever, to  employ  the  Bank  in  the  same  manner  as  its 
predecessor.  The  Societe  Generale,  feeling  itself  indis- 
pensable, refused  to  permit  the  supervision  of  the  court 
of  accounts  over  its  management  as  treasurer  for  the 
State. 

<*  This  narrative  of  the  beginnings  of  the  National  Bank  is  based  mainly 
on  Banques  d'Emission  en  Europe,  Octave  Noel,  Paris,  1888,  pp.  477-488. 

13 


National     Monetary     Commission 

The  Belgian  Government  sought  to  remedy  this  con- 
dition of  things  by  the  creation  of  a  rival  institution.  It 
lent  its  favor  to  the  organization  of  the  Bank  of  Belgium, 
which  was  created  in  1835.  The  Government  plainly 
indicated  its  preference  by  taking  away  from  the  Soci^t^ 
G^n^rale  its  functions  as  cashier  of  the  treasury  and  trans- 
ferring them  to  the  Bank  of  Belgium.  But  the  new 
institution  fell  upon  troublous  times.  A  crisis  loomed 
on  the  horizon  in  1837,  which  became  acute  in  1838,  when 
trouble  with  Holland  was  threatened  over  the  boundaries 
of  Limbourg  and  Luxembourg.  The  Societe  Generale 
seized  the  occasion  to  cripple  its  younger  rival  by  gather- 
ing up  its  notes  and  presenting  them  for  redemption.  On 
December  4,  1838,  the  sum  of  1,000,000  francs  ($193,000) 
was  thus  presented.  On  December  10  another  sum  of 
1,200,000  francs  was  presented,  and  on  December  15 
300,000  francs.  The  Bank  of  Belgium  was  forced  to 
suspend  and  to  seek  the  assistance  of  the  Government. 
By  a  law  of  January  i,  1839,  a  credit  of  2,600,000  francs 
($501,800)  was  granted  to  the  Bank  for  the  redemption 
of  its  notes  and  for  other  purposes,  and  1,400,000  francs 
($270,200)  for  the  repayment  of  the  savings  deposits, 
which  were  under  its  charge. 

This  temporary  reUef  did  not  remove  the  fundamental 
causes  of  weakness.  Both  the  Bank  of  Belgium  and  the 
Societe  Generale  had  locked  up  considerable  amoimts  of 
capital  in  industrial  ventures  from  which  it  could  not  be 
readily  converted  into  cash.  The  crises  which  affected 
Belgium  in  1837  and  in  1838  were  much  more  serious  in 
their  effects  because  the  two  banks  had  to  meet  at  once 
the  demand  for  the  redemption  of  their  notes  and  the 

14 


National      Bank      of      Belgium 

needs  of  the  industrial  enterprises  which  they  were  sup- 
porting. From  these  two  sides — the  demands  of  the  pub- 
lic and  of  their  industrial  clients — the  Bank  of  Belgium 
was  exposed  to  the  disappearance  of  its  metalUc  reserve 
and  the  suspension  of  payments  in  specie. 

Notwithstanding  the  aid  of  the  Government  in  1839,  the 
same  embarrassments  reciured  in  1842.  The  Bank  of 
Belgium  confessed  its  inability  to  fulfill  its  financial 
mission  for  the  Government  and  resigned  its  functions 
as  cashier  of  the  treasury.  The  Societe  Generale  had 
encountered  the  same  difficulties  as  the  Bank  of  Belgium. 
On  its  part  also  it  had  supported  numerous  industrial 
enterprises  and  had  suiBFered  severely  in  the  financial  crises 
through  which  the  country  had  passed.  It  was  even  com- 
pelled in  1842  to  suppress  the  branches  which  it  main- 
tained in  the  provinces,  of  which  the  larger  number  had 
shown  bad  results,  and  to  continue  only  the  branch  at 
Antwerp.  But  the  Societe  Generale  was  more  firmly 
established  than  its  rival  and  was  the  only  institution 
which  was  in  position  to  resume  the  service  of  the  treasury 
without  danger  to  the  public  finances. 

A  new  convention  restored  to  the  Societe  Generale  the 
functions  of  cashier  of  the  State.  The  arrangement  was, 
on  the  part  of  the  Government,  only  a  makeshift.  The 
time  had  come  when  those  responsible  for  the  conduct 
of  public  affairs  were  considering  seriously  the  creation  of 
an  institution  which  should  be  restricted  in  the  scope  of 
its  operations  to  commercial  banking  and  should  not  be 
exposed,  like  the  existing  institutions,  to  the  results  of 
unsound  financiering.  When,  therefore,  the  Socidt^  G^n- 
^rale  in  1843  demanded  the  extension  of  its  charter,  which 

15 


National     Monetary     Commission 

was  asked  by  the  shareholders  for  a  period  of  twenty-five 
years,  the  Government  declared  that  it  would  reserve  to 
itself  the  right  to  indicate  before  the  end  of  the  year  1849 
the  conditions  under  which  the  Bank  might  continue  to 
exist  and  the  modifications  which  it  would  be  required  to 
insert  in  its  statutes. 

The  crisis  of  1848  obliged  both  the  Societe  Generale  and 
the  Bank  of  Belgium  again  to  suspend  payments.  This 
furnished  the  Government  an  opportune  occasion  for  put- 
ting its  plans  in  execution.  The  existing  institutions  were 
protected  for  the  moment  by  making  their  notes  legal 
tender,  while  restricting  their  issues;  but  the  year  1849 
had  hardly  begun  before  the  president  of  the  council  of 
ministers,  M.  Frere-Orban,  formulated  a  series  of  reforms 
which  he  submitted  to  the  Societe  Generale  as  the  basis 
of  the  establishment  of  a  national  bank.  The  conditions 
were  such  as  almost  to  compel  a  refusal.  They  consti- 
tuted a  demand  upon  an  institution  long  in  operation,  gen- 
erally prosperous  and  honorabh^  known,  and  engaged 
from  the  beginning  in  affairs  requiring  time  for  their  devel- 
opment, that  it  should  suddenly  restrict  its  operations  at 
an  almost  certain  loss  and  w4th  grave  prejudice  to  its 
credit. 

The  Government  anticipated  the  refusal  of  the  Bank  to 
adopt  this  policy,  and  was  fully  prepared  in  that  case  to 
propose  the  creation  of  a  new  institution  based  upon  the 
principle  of  issuing  notes  only  upon  commercial  paper. 
From  these  conditions  sprang  the  National  Bank,  which 
was  established  by  a  law  of  May  5,  1850.  The  new  insti- 
tution was  given  a  duration  of  twenty-five  years,  which 
might  be  extended  by  law  upon  the  demand  of  a  majority 


16 


National       Bank      of      Belgium 

of  the  shareholders.  The  capital  was  fixed  at  25,000,000 
francs  ($4,825,000),  divided  into  25,000  shares  of  1,000 
francs  each. 

The  significance  of  the  difference  between  the  character 
of  the  new  institution  as  representative  of  the  State  and 
those  which  it  superseded  in  this  capacity  is  indicated  by 
the  provisions  of  the  charter  in  regard  to  the  forms  of 
business  in  which  it  might  engage.  These  privileges,  as 
laid  down  by  the  law  and  by  the  statutes  of  the  bank, 
were  to  discount  or  buy  bills  of  exchange  and  other  obliga- 
tions relating  to  commercial  operations;  to  buy  Treasury 
bonds  within  the  limits  to  be  prescribed;  to  conduct  the 
purchase  and  sale  of  gold  and  silver;  to  grant  advances 
upon  those  metals;  to  assume  the  collection  of  paper 
which  might  be  remitted  to  it  by  individuals  or  firms;  to 
receive  money  on  current  account;  and  to  receive  on 
deposit  securities,  precious  metals,  and  gold  and  silver 
money,  and,  finally,  to  make  advances  in  current  account 
or  for  short  terms  on  deposits  of  national  securities  or 
other  securities  guaranteed  by  the  State,  within  limits 
and  conditions  to  be  fixed  periodically  by  the  administra- 
tion of  the  Bank  with  the  approval  of  the  Minister  of 
Finance. 

The  beginnings  of  the  Bank  were  not  brilliant.  Com- 
mercial transactions  in  Belgium  were  limited  in  scope 
and  were  the  subject  of  competition  between  the  new 
bank,  the  Soci^te  G^n^rale,  the  Bank  of  Belgium,  and 
several  other  institutions.  To  perform  the  service  of  the 
treasury  compelled  the  new  institution  to  establish 
offices  in  the  chief  places  of  the  country  and  wherever 
the   government    considered    it    necessary.     It    was    con- 

85519—10 2  17 


National    Monetary     Commission 

tended,  moreover,  by  the  authors  of  the  law  that  the 
benefits  which  the  Bank  offered  to  commerce  should  be 
extended  into  all  parts  of  the  country,  in  order  that  no 
merchant  or  manufacturer  should  be  excluded  from  its 
advantages.  The  Bank  was  prudently  managed,  how- 
ever, and  weathered  the  serious  crises  which  shook  Europe 
from  1855  to  1858  and  from  1863  to  1866,  without  embar- 
rassment to  its  credit. 

A  more  serious  test  of  the  prudence  and  resources  of 
the  Bank  came  with  the  war  between  France  and  Germany 
in  1870.  Belgium  was  close  to  the  route  followed  by  the 
contending  armies.  For  this  reason  her  banks  were  the 
channel  through  which  flowed  much  of  the  money  for 
the  expenses  incurred  in  the  maintenance  of  both  the 
French  and  German  troops.  Many  private  financial 
transactions  also  were  transferred,  from  motives  of  pru- 
dence as  well  as  convenience,  from  Paris  and  BerHn  to 
the  National  Bank  at  Brussels.  As  the  result  of  the 
demand  for  discounts  Belgian  commercial  paper  in  the 
Bank,  which  stood  on  July  10,  1870,  at  177,500,000 
francs,  rose  by  July  20  to  203,923,100  francs;  on  July  31 
to  223,231,744  francs;  and  maintained  itself  until  August 
20  in  the  neighborhood  of  204,000,000  francs  ($39,372,000). 

While  other  financial  institutions  and  merchants  thus 
sought  discounts  from  the  Bank  much  larger  in  volume 
than  in  normal  times,  the  public  was  seized  with  panic  and 
presented  notes  in  large  amounts  for  redemption.  Dur- 
ing the  entire  year  1869,  with  an  average  circulation  of 
177,000,000  francs,  the  amount  in  notes  presented  for 
redemption  had  reached  only  216,507,760  francs,  or  a 
daily  average  of  about  600,000  francs  ($115,000).     Dur- 

x8 


National      Bank      of      Belgium 

ing  the  eighty-two  days  from  July  i  to  September  20, 
1870,  notes  presented  for  redemption  reached  the  sum  of 
85,022,000  francs,  or  over  1,000,000  francs  ($193,000)  per 
day.  The  presstue  was  felt  most  severely  during  the  lat- 
ter half  of  July,  when  the  daily  average  attained  about 
2,094,000  francs  ($404,142),  and  redemptions  on  the  single 
day  of  July  20  were  6,286,000  francs,  and  on  July  21 
7,025,000  francs. 

The  intensity  of  the  panic  was  much  increased  by  the 
shortsighted  measures  taken  by  the  government  in  cast- 
ing distrust  upon  the  soundness  of  the  Bank,  instead  of 
giving  it  moral  support.  From  the  early  days  of  July, 
the  Royal  Government,  fearing  that  the  declaration  of 
war  between  France  and  Germany  would  lead  to  the  vio- 
lation of  the  neutraUty  of  Belgium,  warned  the  National 
Bank  to  take  measures  to  transfer  to  Antwerp  that  por- 
tion of  the  metallic  reserve  representing  the  balance  of 
the  treasury.  On  July  13,  1870,  without  further  previous 
notice,  the  Bank  was  informed  that  this  operation  must 
be  effected  without  delay.  The  Bank  had  declared  that 
the  operation  could  be  accomplished  within  three  hours, 
and  the  sudden  demand  for  its  execution  was  a  signal  of 
alarm  which  did  not  fail  to  arouse  great  uneasiness.  The 
order  was  revoked  for  the  moment,  only  to  be  renewed 
on  the  1 5th  by  an  oral  demand  from  a  subordinate  of  the 
Ministry  of  Finance,  with  the  condition  that  the  transfer 
should  be  made  under  the  superintendence  of  two  agents 
of  the  department.  The  transfer  of  the  metallic  reserve 
of  the  treasury  outside  of  Brussels  deprived  the  Bank  of 
valuable  resources  at  a  moment  when  anxiety  was 
spreading  throughout  the  country.     Inevitably,  the  effort 

'9 


National    Monetary     Commission 

to  keep  the  measure  secret  was  unsuccessful  and  provoked 
violent  excitement,  which  led  to  many  demands  by  the 
public  for  the  redemption  of  notes  at  the  counters  of  the 
Bank. 

The  Ministry'  of  Finance  added  to  the  difficulties  of  the 
situation  by  directing  its  agents  in  the  provinces  to  keep 
very  small  reserves  in  cash  and  not  to  modify  their  char- 
acter— that  is,  not  to  exchange  coin  for  bank  notes.  The 
Minister  of  War  at  the  same  time  addressed  to  all  the 
heads  of  army  corps  a  circular  warning  them  that  he  had 
taken  measures  in  concert  with  the  Minister  of  Finance 
that  all  agencies  of  the  Bank,  especially  the  most  impor- 
tant, should  be  provided  with  gold,  silver,  and  notes  in 
sufficient  quantities  to  provide  for  the  exchange  of  bank 
notes  which  might  be  found  in  the  military  chests. 

These  measures  threw  such  discredit  upon  the  notes  of 
the  National  Bank  and  so  seriously  impaired  confidence 
in  the  circulation,  at  a  moment  when  the  difficulty  of 
obtaining  precious  metals  was  becoming  constantly  greater 
on  the  foreign  exchanges,  that  it  soon  became  imperative 
to  make  a  change  of  policy.  The  Minister  of  War  on 
July  31 — five  days  after  his  first  circular— addressed  a 
new  order  to  the  heads  of  army  corps,  informing  them 
that  he  had  been  requested  by  his  associate  in  the  finance 
department  "to  recommend  particularly  to  governing 
boards  and  to  other  paymasters  of  the  army  to  demand 
as  little  gold  as  possible  of  the  agencies  of  the  National 
Bank  and  to  pay  in  bank  notes  everything  susceptible  of 
being  thus  paid,  as  well  as  to  exchange  notes  of  500  francs 
and  1,000  francs  which  might  be  on  hand  for  denomina- 
tions of  20  and  50  francs  in  order  to  facilitate  payments." 


National      Bank       of      Belgium 

It  was  too  late  to  counteract  fully  the  effects  of  the 
earUer  measures.  The  Bank  was  compelled  to  raise  the 
rate  of  discount  and  then  to  take  restrictive  measiu'es 
by  limiting  the  amount  of  paper  accepted  from  the  same 
indorser  and  maturing  at  the  same  date.  Advantage  had 
already  been  taken,  from  the  date  of  the  transfer  of  the 
treasury  reserves  to  Antwerp,  of  the  option  given  the  Bank 
by  the  law  to  redeem  its  notes  only  at  Brussels,  except 
that  it  continued  redemptions  at  Antwerp. 

The  Bank  was  struggling  bravely  in  the  meantime  to 
meet  legitimate  demands.  The  cash  reserve  stood  on 
July  15,  soon  after  the  trouble  broke  out,  at  15,000,000 
francs  ($2,895,000),  which  was  above  25  per  cent  of 
demand  liabilities.  The  bank  hastened  to  seek  addi- 
tional cash  resources  to  the  amount  of  25,000,000  francs 
in  the  markets  of  London,  Amsterdam,  Hamburg,  and 
Paris.  In  spite  of  the  enormous  amounts  of  coin  called 
for  by  the  crisis,  the  metallic  reserve  of  the  Bank  was  not 
permitted  to  fall  below  the  limits  assigned  to  it  by  the 
management. 

The  discount  rate  was  promptly  advanced  in  order  to 
check  unnecessary  demands  for  accommodation.  The 
rate  remained  from  July  i  to  July  15  at  2^  per  cent  for 
accepted  bills  and  at  3  per  cent  for  those  which  had  not 
been  accepted.  These  rates  were  promptly  advanced  on 
the  15  th  to  5  and  ^%  percent,  where  they  remained  until 
August  5,  when  they  were  again  advanced  to  6  and  6K 
per  cent.  A  rate  of  7  per  cent  was  then  charged  for 
drafts  drawn  from  abroad  upon  Belgium. 

At  the  outbreak  of  the  crisis  the  Bank  possessed  foreign 
paper  to  an  amount  of  64,144,561.25  francs  ($12,370,000). 


National     Monetary     Commission 

Such  prompt  disposition  was  made  of  these  securities  to 
obtain  coin  that  on  July  31  the  amount  of  such  paper 
was  reduced  to  7,227,333.20  francs  and  on  August  20  to 
3,531,907.38  francs.  The  proceeds  of  this  paper  was 
employed  in  the  purchase  of  gold  and  silver,  principally 
silver  bullion,  which  the  mint  converted  into  5-franc 
pieces,  with  which  the  bank  filled  the  void  in  its  reserves 
caused  by  the  redemption  of  notes. 

Thanks  to  these  energetic  measures,  which  imposed  a 
loss  of  705,340.42  francs  ($136,100),  the  Bank  weathered 
the  storm  and  was  able  by  August  27,  1870,  to  reduce 
discount  rates  to  5>^  per  cent  for  accepted  bills  and  6  per 
cent  for  those  not  accepted,  following  this  by  reductions 
on  September  20  to  4^  and  5  per  cent,  and  on  October 
8  to  3^  and  4  per  cent.  Calm  was  reestablished  by  the 
middle  of  August  and  the  Bank  returned  to  normal  con- 
ditions. The  special  commission  which  had  been  ap- 
pointed by  the  Government  to  study  the  best  means  of 
allaying  the  disturbance  found  nothing  to  do,  and  the 
approach  of  the  date  of  the  expiration  of  the  charter 
gave  emphasis  to  the  success  with  which  the  management 
of  the  Bank  had  piloted  it  through  the  storm  and  through 
the  difficulties  invoked  by  ministerial  blundering. 

So  successfully  had  the  Bank  met  the  stress  of  the  war 
between  France  and  Prussia  that  there  was  little  oppo- 
sition to  the  renewal  of  the  charter  when  the  proposal 
was  submitted  in  1872.  There  were  indeed  protests  from 
one  or  two  deputies  against  bringing  in  the  project  of 
renewal  on  February  27,  1872,  nearly  three  years  before 
the  expiration  of  the  old  charter,  and  there  was  a  pro- 
posal to  reserve  to  the  chambers  the  right  of  revision  at 


National       Bank       of      Belgium 

either  of  the  two  sessions  prior  to  January  i,  1883,  which 
failed  only  by  a  vote  of  38  in  the  affirmative  to  53  in  the 
negative,  and  i  not  voting.**  The  final  vote  in  the  cham- 
bers, however,  taken  on  May  10,  1872,  showed  87  votes 
in  favor  of  the  project  of  renewal,  with  only  6  in  the 
negative,  and  3  not  voting.  The  debate  in  the  Senate 
was  short.  The  bill  passed  at  the  sitting  of  May  17  by 
the  unanimous  vote  of  the  37  members  voting,  with  i 
abstaining  because  he  was  one  of  the  censors  of  the 
Bank.  The  feeling  indicated  by  the  majority  in  the 
debates  was  in  accord  with  a  passage  from  the  report 
made  in  the  name  of  the  central  section  of  the  Chamber 
of  Deputies  by  M.  Eudore  Pirmez:^ 

"It  might  be  asked  if  a  profound  examination  of  the 
principles  on  which  the  National  Bank  rests  is  still  nec- 
essary. The  discussion  seems  uncalled  for.  The  National 
Bank  is  not  attacked  in  any  of  its  fundamental  princi- 
ples. Your  sections,  in  devoting  themselves  to  the  exami- 
nation of  the  subject,  have  brought  none  of  these  prin- 
ciples into  question.  They  have  limited  themselves  to 
considerations  of  detail.  Beyond  this,  complete  unanim- 
ity seems  to  reign.  There  is  general  accord  with  the 
position  of  the  Government,  that  there  can  be  no  ques- 
tion of  destroying  in  order  to  reconstruct,  but  only  of 
preserving  and  improving.  Parties,  however  lively  their 
differences,  have  had  the  wisdom,  to-day  as  in  1850,  to 
silence  their  divisions  in  a  matter  which  does  not  con- 
cern them,  and  we  shall  see  without  doubt  an  institution, 
created  upon  the  proposition  of  one  of  the  chiefs  of  one 

«  Documents  OlTiciels,  1872,  p.  409. 
b  Documents  OfTiciels,  1872,  p.  20. 


23 


National     Monetary     Commission 

of  the  great  political  schools,  receive  a  new  existence 
upon  the  proposal  of  one  of  the  chiefs  of  the  other — an 
agreement  which  honors  equally  him  who  had  the  initi- 
ative in  the  work  and  him  who  seeks  only  to  render  it 
better." 

The  extension  of  the  charter  became  law  on  May  20, 
1872.  The  capital  of  the  bank  was  increased  from 
25,000,000  francs  to  50,000,000  francs.  The  provision 
was  then  first  introduced  that  the  circulation  in  excess 
of  275,000,000  francs  should  pay  a  tax  of  a  quarter  of  i 
per  cent  semiannually,  or  at  the  rate  of  one-half  of  i 
per  cent  a  year.  It  was  at  this  time  also  that  the  re- 
quirement was  first  imposed  that  the  profits  arising  from 
a  discount  rate  above  5  per  cent  should  go  into  the  pub- 
lic treasury.  The  life  of  the  Bank  was  extended  until 
January  i,  1903,  and  it  was  not  for  more  than  a  quarter 
of  a  century  that  the  question  of  the  relations  of  the 
Bank  to  the  State  and  the  public  again  came  under  gen- 
eral discussion. 

So  firmly  was  the  credit  of  the  Bank  established  after 
the  trial  of  the  war  between  France  and  Germany  that 
it  was  specially  stipulated  in  the  treaty  of  peace  between 
the  belligerent  countries  that  among  the  forms  of  pay- 
ment accepted  by  Germany  from  France  should  be  notes 
of  the  National  Bank  of  Belgium.  The  effect  of  this 
stipulation  upon  the  operations  of  the  Bank  was  thus  set 
forth  in  the  annual  report  for  1874:'' 

"It  has  not  been  forgotten  that  the  treaty  of  Frank- 
fort, concluded  between  Germany  and  France,  stipulated 
for  the  admission  of  Belgian  bills  as  one  of  the  means  of 

a  Quoted  by  Noel,  I,  p.  511. 
24. 


National       Bank       of      Belgium 

liquidation  of  the  war  indemnit}'.  This  striking  proof  of 
the  confidence  inspired  by  our  estabhshment  abroad, 
however  honorable  it  may  have  been,  was  not  without 
certain  inconveniences  for  Belgium.  It  provoked  natu- 
rally an  unsought  extension  and  considerable  fluctuations 
in  our  credit  circulation.  The  redemption  and  reinstate- 
ment in  our  vaults  of  more  than  115,000,000  francs  of 
these  bills,  effected  within  a  space  of  five  months,  will 
permit  the  appreciation  of  the  importance  of  these  move- 
ments. One  of  the  oldest  and  most  powerful  financial 
institutions  of  Berlin  (the  Maritime  Commerce  Company) 
was  charged  by  the  German  Treasury  with  the  negotia- 
tion of  our  bills.  This  institution  made  overtures  to 
the  National  Bank  with  a  view  of  effecting  the  exchange 
under  the  most  advantageous  conditions.  We  did  not 
hesitate  to  extend  a  cooperation  entirely  disinterested, 
having  no  other  concern  than  to  guard  the  commerce 
and  industry  of  the  country  from  the  inconvenience  of 
sharp  variations  in  the  bank  reserve,  which  would  inevit- 
ably have  produced  considerable  exportations  of  the  pre- 
cious metals.  It  was  especially  by  means  of  the  pur- 
chase of  foreign  paper,  of  which  the  influence  can  be 
found  in  the  assets  of  the  Bank,  that  the  repayment  of  so 
considerable  a  sum  was  effected,  without  shock  and  with- 
out prejudice  to  the  country." 

The  increase  in  the  discounts  of  the  Bank  during  the 
two  years  1872  and  1873  showed  the  influence  of  these 
operations.  Total  discounts,  which  had  been  only  1,522,- 
000,000  francs  in  1871,  advanced  to  1,853,200,000  francs 
in  1872,  and  to  2,019,300,000  francs  ($389,000,000)  in 
1873.     The  increase  was  striking  in  the  number  of  bills 

25 


National     Monetary     Commission 

drawn  upon  Belgium,  but  was  more  notable  in  the  pro- 
portion of  foreign  bills  discounted,  which  increased  in 
amount  from  2,400,000  francs  in  1871  to  125,800,000  francs 
in  1872,  and  67,300,000  francs  in  1873.  The  amount  of 
this  foreign  paper  discounted  fell  off  in  1874  to  38,000,000 
francs,  only  to  increase  materially  a  few  years  later,  when 
the  policy  of  carrying  foreign  bills  in  the  reserve  was  per- 
manently adopted. 

In  anticipation  of  the  expiration  of  the  charter  in  1903, 
a  measure  was  prepared  by  M.  P.  de  Smet  de  Naeyer, 
Minister  of  Finance,  which  was  the  basis  of  the  law  finally 
enacted;  but  a  vigorous  and  prolonged  opposition  devel- 
oped from  the  benches  of  the  Socialist  party,  which  was 
represented  in  the  chambers  by  some  of  the  most  eminent 
and  learned  professors  of  political  economy  in  Belgium. 
The  project  of  the  Government,  making  moderate  changes 
in  the  charter,  was  presented  to  the  chambers  on  Decem- 
ber 22,  1898.  It  will  be  seen  in  the  sequel  that  while  the 
government's  project  became  law  without  modification 
and  did  not  change  the  essential  character  of  the  Bank, 
yet  the  influence  of  the  critical  attitude  assumed  toward 
corporate  property  was  shown  in  the  government  proj- 
ect itself  in  the  heavy  burdens  imposed  upon  the  Bank 
and  the  large  share  in  its  profits  attributed  to  the  State. 

Upon  several  important  questions  a  considerable  vote 
was  cast  for  the  amendment  of  the  government  measure. 
A  proposal  by  M.  Theodor,  in  the  Chamber  of  Deputies, 
that  the  Government  should  have  the  right  to  terminate 
the  charter  on  January  i,  1914,  if  a  preliminary  notice 
were  given  of  two  years,  received  25  votes,  with  73  votes 
in   the   negative.  <*     Upon   two   amendments,    compelling 

a  Discussions  Parlementaires,  1900  (sitting  of  January  31.  1900),  p.  526. 

26 


National      Bank       of      Belgium 

the  Bank  to  advance  funds  to  the  Government  to  pro- 
mote small  agricultural  and  urban  credits,  the  vote  was 
much  closer.  The  amendment  of  M.  Theodor,  setting 
aside  20,000,000  francs  for  such  purposes,  failed  only  by 
a  vote  of  39  against  47 ;  while  that  of  M.  Delvaux,  author- 
izing the  Government  to  borrow  for  such  purposes  on 
treasury  bonds  to  an  amount  not  exceeding  3,000,000 
francs  a  year,  failed  by  38  votes  against  43.*^ 

When  the  vote  was  taken  on  February  15,  1900,  in  the 
Chamber  of  Deputies,  66  members  voted  for  the 
government  project,  29  voting  in  the  negative,  and  7 
abstaining  from  voting.  In  the  upper  chamber,  as  in 
1872,  the  debate  was  much  shorter  and  the  supporters 
of  the  Government  were  relatively  stronger.  The  bill 
passed  at  the  sitting  of  March  23,  1900,  by  a  vote  of  55 
in  the  affirmative,  2  in  the  negative,  and  5  abstaining 
from  voting — 4  upon  the  ground  of  participation  in  the 
ownership  or  management  of  the  Bank  and  i  upon  the 
ground  that  the  bill  did  not  embody  two  provisions  which 
he  considered  of  vital  importance.  '' 

The  new  law,  which  was  proclaimed  by  King  Leopold 
on  March  26,  1900,  continued  the  life  of  the  Bank  until 
January  i,  1929,  and  made  no  change  in  the  amount  of 
the  capital.  The  most  important  changes  made  were  in 
granting  a  larger  share  in  the  profits  of  the  Bank  to  the 
Government.  The  limit  of  untaxed  notes  was  left  un- 
changed at  275,000,000  francs,  in  spite  of  the  increase  in 
the  circulation,  from  about  200,000,000  francs  in  1870  to 
600,000,000  francs  in  1900. 

a  Discussions  Parlementaires,  1900,  pp.  684-686. 
^  Ibid.,  pp.  896-897. 


27 


National     Monetary     Commission 

THE   QUESTION    OF    A    STATE-OWNED    BANK. 

The  National  Bank  of  Belgium,  as  already  set  forth,  is 
a  joint-stock  company,  so  far  as  concerns  ownership,  but 
is  under  the  direct  supervision  of  the  State.  It  was  de- 
clared by  Article  XXIV  of  the  law  of  1850,  which  is  still 
in  force: 

"ARTICI.E  XXIV. 

"The  Government  has  the  right  to  control  all  opera- 
tions. It  shall  have  the  power  to  prevent  the  execution 
of  any  measure  which  shall  be  contrary  to  the  law,  to  the 
statutes,  or  to  the  interests  of  the  State." 

The  governor  is  appointed  by  the  King  for  five  years, 
and  may  be  reappointed.  The  six  directors,  who  consti- 
tute with  the  governor  the  active  administrative  council, 
are  chosen  in  general  meeting  of  the  shareholders,  and 
serve  for  six  years.  The  Government  exercises  its  super- 
vision through  a  special  commissioner,  whose  compensa- 
tion is  fixed  by  the  Government  by  agreement  with  the 
Bank,  but  which  is  paid  by  the  Bank.  There  is  also  a 
council  of  censors,  consisting  of  seven  members,  elected 
by  the  shareholders,  and  performing  the  functions  of 
auditors  and  supervisors. 

Thus,  while  a  firm  guiding  hand  is  kept  by  the  Govern- 
ment upon  the  National  Bank,  it  is  governed  in  its  com- 
mercial operations  by  officers  chosen  from  the  business 
community  and  in  accordance  with  the  demands  of  com- 
mercial conditions.  The  subject  was  discussed  at  con- 
siderable length  in  1899  whether  this  form  of  organiza- 
tion, similar  in  general  character  to  that  of  the  Banks  of 
France  and  Germany,  should  not  be  superseded  by  that 


28 


National      Bank      of      Belgium 

of  a  bank  owned  entirely  by  the  State.  On  the  very  day 
following  the  presentation  in  the  chambers  of  the  gov- 
ernment measure  for  the  renewal  of  the  charter,  Prof. 
Hector  Denis,  one  of  the  leading  professors  of  poHtical 
economy  in  Belgium  and  a  pronounced  advocate  of  state 
socialism,  submitted  a  proposal  that  there  should  be  a 
general  inquiry  into  the  operations  of  the  Bank  and 
other  banking  institutions  in  Belgium.  He  proposed  that 
the  inquiry  should  be  made  by  the  Superior  Council  of 
Industry  and  Commerce  and  should  deal  with  the  follow- 
ing subjects:** 

' '  On  the  actual  conditions  and  degree  of  development 
which  has  been  attained  in  Belgium  by  credit,  and  espe- 
cially commercial  credit  in  all  its  forms. 

"On  the  part  in  this  which  has  been  taken  by  the 
National  Bank. 

"On  the  independent  institutions  which  are  interested 
therein  and  their  relations  with  the  National  Bank. 

"On  the  reforms  which  experience  and  science  will  per- 
mit to  be  introduced  into  Belgium,  in  the  interest  of  the 
general  body  of  merchants  and  producers  of  the  country 
and  in  the  interest  of  the  State,  in  the  organization  and 
development  of  credit  and  of  circulation,  and  in  the  oper- 
ations of  a  bank  of  issue. 

"On  the  extension  of  perfected  modes  of  collection, 
payment,  transfer,  and  clearing,  which  will  save  or  render 
unnecessary  in  the  future  the  employment  of  metallic 
money. 

' '  On  the  means  of  preventing  or  ameliorating  monetary 
crises. 


o  Documents  Parlementaires:   1900,  pp.  97-98. 
29 


National     Monetary     Commission 

' '  On  the  maintenance  of  the  privilege  accorded  to  the 
National  Bank  or  on  the  reforms  which  should,  in  the 
interest  of  commerce,  of  the  public,  and  of  the  State,  be 
introduced  into  the  legal  constitution,  the  organization, 
the  services,  and  the  operation  of  said  Bank  and  its 
branches,  and  its  relations  with  other  Belgian  institu- 
tions, with  the  Government,  or  with  foreign  banks." 

This  inquiry  was  vigorously  opposed  by  the  represen- 
tatives of  the  Government  in  the  chamber  as  involving 
unnecessary  delay  and  as  entirely  uncalled  for  by  condi- 
tions prevailing  in  Belgium.  The  memorandum  sub- 
mitted by  M.  Denis  quoted  Professor  Nasse,  of  the  Uni- 
versity of  Bonn,  as  declaring  that  "for  a  long  time  the 
issue  of  bank  notes  was  a  private  banking  operation  in 
the  same  manner  as  the  creation  of  bills  of  exchange?, 
and  that  it  was  only  little  by  little  that  the  bank  note 
assumed  the  character  of  money  which  it  now  possessed. 
At  the  present  time,  since  the  public  character  of  the 
issue  of  bank  notes  is  recognized,  one  is  guilty  of  an 
inconsistency  in  confiding  this  public  service  to  a  private 
corporation."  After  quoting  these  words.  Professor  Denis 
summed  up  his  memorandum  with  this  declaration:'^ 

"And  if  he  speaks  truly,  the  nation  which  has  suc- 
ceeded in  creating  the  Union  of  Credit  and  which  has 
solved  the  problem  of  the  savings  bank  more  threatened, 
perhaps,  in  the  past  with  abuses  by  the  State  than  bank- 
ing itself,  is  that  nation  powerless  to  realize  scientifically, 
and  to  eliminate  all  abuses  from  it,  the  system  of  a  state 
bank?  Even  if,  while  recognized  as  sound  and  attain- 
able, it  may  not  perhaps  be  the  work  of  a  single  day,  the 


a  Documents  Parlementaires:   1900  p. 
30 


National      Bank       of      Belgium 

influence  of  an  inquiry  will  yet  inoculate  the  public  mind 
with  the  necessity  of  preparing  for  it  by  a  normal  and 
organic  evolution  and  of  giving  it  the  imprint  of  our 
national  genius." 

Against  this  demand  for  a  state-owned  bank,  which  was 
supported  by  arguments  going  to  show  the  profits  made  by 
the  National  Bank,  the  central  section  of  the  Chamber  of 
Deputies  made  a  report  through  M.  Delbeke  on  June 
29,  1899,  which  took  up  most  of  these  points.  It  opposed 
the  inquiry  demanded  by  M.  Denis  upon  the  ground  that 
no  complaint  had  been  made  against  the  organization  of 
the  Bank  or  its  operation,  neither  on  the  part  of  com- 
merce, of  industry,  of  finance,  of  borrowers,  by  organized 
bodies,  nor  in  the  press.  The  National  Bank,  it  was  de- 
clared, is  alone,  perhaps,  in  presenting  this  phenomenon; 
in  a  country  where  everybody  complains  no  one  complains 
of  it.  On  the  contrary,  the  Union  of  Credit  and  the  popu- 
lar banks  have  inscribed  in  their  reports  the  expression  of 
their  satisfaction  and  of  their  gratitude.*^       ' 

It  was  declared  by  M.  Delbeke  that  the  expression  "a 
bank  of  state,"  did  not  convey  the  idea  of  a  clearly  defined 
type.  In  certain  respects  the  National  Bank  of  Belgium 
might  be  called  a  state  bank,  since  the  State  named  and 
removed  its  chief  officers,  controlled  its  management  by  a 
commissioner,  and  was  required  to  approve  the  most 
important  of  its  acts.  The  real  question  was  reduced, 
therefore,  to  the  abolition  of  the  capital  furnished  by  indi- 
viduals. The  majority  of  the  section  for  which  M.  Delbeke 
was  reporting  declared  themselves  opponents  of  the  theory 
of  complete  state  control,  because  they  considered  that  the 

a  Documents  Parlementaires;   1900,  p.  103. 
31 


National     Monetary     Commission 

State,  already  a  bad  manufacturer  and  a  bad  merchant, 
would  prove  a  still  worse  financier.  It  was  not  a  question 
whether  a  state  bank  was  possible,  but  whether  its  man- 
agement would  be  better  than  one  under  private  initiative, 
guided  by  self-interest  and  controlled  by  the  public  powers. 
Upon  this  point  M.  Delbeke  continued:  " 

"The  answer  can  not  be  doubtful  when  one  considers 
the  grave  inconveniences  in  the  management  of  general 
credit  which  would  be  presented  by  the  constant  intrusion 
of  political  considerations.  The  discounts,  the  credit  to 
be  granted  to  this  or  that  person,  to  this  or  that  class,  the 
collateral  to  be  waived  or  required  for  such  a  group  of 
citizens,  the  advances  in  mass  to  be  made  to  this  or  that 
element  of  the  population — all  these  would  become  the 
clubs  of  election  day.  It  would  be  discussed  in  the  cam- 
paign and  would  form  the  object  of  pledges  taken  by  can- 
didates elected  and  even  of  imperative  restrictions.  Is  it 
necessary  to  add  that  these  questions  would  be  determined 
under  the  single  impulse  of  appetite  and  in  absolute  con- 
tempt of  economic  laws  and  of  the  necessities  of  credit  and 
of  the  circulation?  One  would  thus  find  created  and 
steadily  growing  an  electoral  scourge  till  now  unknown. 

"  An  example  is  furnished  even  this  year  in  Germany  by 
the  debates  on  the  renewal  of  the  monopoly  of  the  Bank 
of  the  Enipire  which  gives  visible  form,  even  to  the  least 
clear-sighted,  to  this  great  danger.  The  suppression  of 
the  private  capital  has  been  demanded  there  with  ardor  by 
the  agrarians  and  not  by  the  socialists,  who,  contrary  to 
the  policy  of  the  socialists  of  Belgium,  have  energetically 
demanded  its  continuance.     The  agrarians  wish  to  render 

o  Documents  Parlementaires:   1900,  p.  121. 
32 


National      Bank       of      Belgium 

the  State  master  of  the  Bank,  because  they  are  to-day  mas- 
ters of  the  State.  If  the  State  becomes  master  of  the 
Bank  of  the  Empire,  the  agrarians  hope  that  nothing  can 
longer  prevent  them  from  compelhng  the  State  to  employ 
the  funds  of  the  Bank  in  the  execution  of  their  programme. 
It  is  important  to  place  the  central  organism  of  credit 
aloof  from  such  assaults,  under  which  it  would  not  fail  to 
succumb,  dragging  down  with  it  public  prosperity. 

"It  is  a  common  error  to  believe  that  the  State  alone 
gives  solidity  to  a  bank  of  issue,  that  the  credit  of  the 
State  is  the  sole  origin  of  the  credit  of  the  Bank  and  of  its 
notes,  and  that,  in  consequence,  it  can  not  be  dispensed 
with.  History  proves  that  governments  have  been  saved 
by  the  credit  of  the  chartered  bank  and  that  the  credit 
circulation  has  remained  intact,  thanks  to  its  private 
origin,  in  the  midst  of  the  crash  of  the  credit  of  the  State. 
'The  Bank  of  France  saved  us,'  said  M.  Thiers,  '  because 
it  was  not  a  bank  of  state.'  During  the  war  of  1870,  says 
a  leading  unsigned  article  in  the  '  Journal  des  D^bats '  of 
July  2,  1895,  the  securities  of  the  State  had  fallen  from 
72  per  cent  to  50  per  cent,  while  the  note  of  the  Bank  of 
France,  bearing  the  signature  of  a  private  establishment, 
had  lost  almost  none  of  its  value. 

"Is  it  necessary  to  point  out,  among  so  many  other 
dangers,  the  danger  in  the  liberty  given  to  governments  to 
draw  upon  the  resources  of  the  bank  of  issue — the  irre- 
sistible temptation  to  inflate  the  credit  circulation  and  to 
transform  the  bank  note  into  paper  money  and  ultimately 
into  the  assignat?  It  is  vain  to  pretend  that  this  tempta- 
tion is  not  irresistible.  The  facts  show  it  to  be  such.  In 
vain  is  it  answered,  that  even  private  banks,  like  those  of 

85519— I''' ?,  33 


National     Monetary      Commission 

Spain  and  Portugal,  have  not  had  the  virtue  to  resist  the 
soHcitations  of  the  treasury  in  extremity.  The  real  point 
is  whether  the  credit  of  these  nations  would  not  have 
fallen  even  lower  with  banks  of  state.  In  vain  is  it  said 
that  private  interest  in  its  turn  will  drive  the  banks  into 
complacency  toward  the  State.  In  private  banks  of 
issue  this  private  interest  finds  in  itself  an  insurmountable 
limit  to  its  complacencies." 

Turning  to  the  point  that  all  the  profits  now  going  to 
private  owners  could  be  converted  into  reductions  of  the 
rate  of  discount  to  borrowers,  so  as  to  realize  the  opti- 
mistic dream  of  an  interest  rate  of  one-tenth  of  i  per 
cent,  M.  Delbeke  inquired  how  it  would  be  possible  with 
such  a  rate  to  prevent  the  commercial  paper  of  the  world 
pouring  into  the  Bank  and  exhausting  its  resources.  The 
state  bank,  moreover,  however  ably  managed,  would  not 
be  able  to  act  with  the  promptness  of  a  private  bank  in 
great  emergencies.  Referring  to  the  suspension  of  a 
banking  house  at  Brussels  a  few  years  before,  it  was 
recounted  how  several  millions  had  been  obtained  within 
an  hour  from  the  National  Bank.  "If  I  had  had  to  deal 
with  a  bank  of  state,"  said  the  narrator,  "I  would  not 
have  dared  to  make  the  application,  because  it  w^ould 
have  involved  sums  belonging  to  the  treasury.  Moreover, 
I  would  not  have  been  able  to  do  it  without  the  interven- 
tion of  the  legislature;  and  before  the  chambers  had  acted 
the  catastrophe  would  have  taken  place." 

In  view  of  these  considerations  and  others  which  were 
invoked,  the  central  section  declared  that  the  system 
already  in  operation  afforded  the  advantages  and  assur- 
ances of  private  initiative  at  the  same  time  as  the  guaran- 


34 


National      Bank       of      Belgium 

tees  of  interv^ention  and  control  by  the  State,  and  was  thus 
in  accord,  not  only  with  the  suggestions  of  wise  and  prac- 
tical policy,  but  with  the  latest  conclusions  of  financial 
science.'* 

Their  attitude  was  sustained  in  the  Chamber  of  Deputies 
by  a  large  majority.  Professor  Denis  crystallized  the 
movement  for  a  state-owned  bank  by  a  proposed  amend- 
ment to  the  government  measure,  which  gave  to  the  bank 
an  independent  legal  personality,  but  proposed  that  the 
capital  should  be  provided  by  the  State  in  the  form  of 
3  per  cent  rentes,  which  should  not  bear  interest  while 
in  possession  of  the  bank.  The  liabilities  of  the  bank,  in 
case  of  liquidation  with  impaired  assets,  were  to  be  met 
by  the  State.  The  council  of  administration  was  to  be 
named  by  the  King,  the  college  of  censors  by  the  chambers, 
half  to  be  chosen  from  lists  submitted  by  the  Superior 
Council  of  Commerce  and  Industry.  This  proposal  was 
rejected,  23  to  72,  with  one  member  abstaining.'' 

In  the  Senate  report  also  the  project  of  a  state-owned 
bank  was  severely  criticised.  Among  the  reasons  set 
forth  for  opposing  such  a  new  departure  were  these  :•= 

"There  is  first,  the  confusion  of  public  and  private 
credit,  to  the  great  damage  of  each;  for  they  ought  to 
remain  distinct,  for  their  respective  good  and  for  the 
mutual  assistance  which  they  are  at  times  called  upon  to 
lend  to  each  other.  Further,  there  is  the  acceptance  by 
the  State  of  a  task — the  task  of  discounting — which  is 
not  within  its  competence  and  of  which,  even  with  the 
best  of  will,  it  will  acquit  itself  badly.     It  is  neither  wise 

a  Documents  Parlementaires:  1900,  pp.  1 21-126. 

^  Discussions  Parlementaires:   1900,  p.  464. 

'^  Documents  Parlementaires:   1900,  pp.  341-344. 

35 


National     Monetary     Co  m  m  i s s  ion 

nor  practicable  to  suppress  the  legitimate  stimulus  of 
private  interest  in  such  affairs  as  discount.  It  must  not 
be  believed  that  in  such  a  matter  disinterestedness  alone 
suffices  or  can  afford  a  better  guide  than  the  foresight  of 
those  who  run  the  risks  and  reap  the  benefits  of  such 
operations.     *     *     * 

"  The  bank  of  state  has  been  represented  as  a  means  of 
furnishing  credit  to  a  greater  number  of  persons,  as  a 
means  of  popularizing  credit  (democratiser  le  credit).  It 
is  possible  to  imagine  a  bank  of  Providence,  distributing 
capital  to  every  applicant  without  adequate  guaranties; 
but  such  an  organism  is  the  negation  of  the  conditions 
upon  which  the  problem  of  credit  rests  and  ought  to  be 
solved.  It  would  involve  within  a  brief  inter\'al  filling 
the  assets  with  impaired  securities,  the  ruin  of  the  bank, 
and  the  demoralization  of  credit  itself. 

"  Others  see  in  a  bank  of  state  a  means  of  procuring 
discount  at  the  lowest  possible  price  for  all,  at  'the  price 
of  return,'  as  has  been  said — indicating  by  that  the  cost 
of  administration  and  a  premium  against  risks.  But  this 
is  a  misunderstanding  of  the  factors  by  which  the  market 
for  money  is  governed,  independent  of  the  institution 
which  grants  discount,  whether  that  be  a  bank  of  state  or 
a  private  bank.  The  first  is  no  more  capable  of  reducing 
the  rate  of  discount  than  the  second.  One  does  not  find, 
indeed,  that  banks  of  state  acquit  themselves  of  this 
function  better  than  others — witness  the  Imperial  Bank 
of  Russia,  which  in  the  month  of  December  last  recorded 
a  rate  of  7  per  cent — unless  one  wishes  to  fix  rates  arti- 
ficially low,  surrendering  the  resources  of  the  bank  to  the 
assaults  of  bad  paper  within  and  pillage  from  without! 

36 


National       Bank       of       Belgium 

But  this  again  means  ruin  and  demoralization  by  another 
road." 

In  the  Senate  the  debate  on  the  articles  of  the  new  law 
was  brief  and  no  amendment  was  offered  to  change  the 
fundamental  character  of  the  Bank. 

CHARACTER   OF   BUSINESS   PERMITTED   AND   FORBIDDEN. 

The  fundamental  principles  upon  which  a  bank  of  issue 
should  be  based,  as  set  forth  by  M.  Frere-Orban  in  pro- 
posing the  charter  of  the  National  Bank  in  1850,  were  as 
follows :  '^ 

"A  bank  ought  to  devote  itself  only  to  operations  which 
are  certain.  It  should  be  able  always  to  meet  its  engage- 
ments. It  should  be  in  a  degree  infallible.  Every  enter- 
prise or  form  of  commerce  of  a  nature  to  impair  its  credit 
ought  to  be  carefully  avoided.  It  ought  not  to  lock  up 
its  capital.  It  ought  not  to  borrow,  but  should  operate 
with  its  own  resources.  It  should  not  carry  on  industry, 
but  it  ought  to  be  impartial  and  to  discount  paper  which 
embodies  the  required  conditions.  It  ought  to  stand  as 
intermediary  between  the  capitalist  and  the  producer,  to 
distribute  capital  with  justice  and  liberality  through  all 
parts  of  the  body  corporate." 

Significant  of  the  determination  to  adhere  to  these 
principles  are  the  restrictions  imposed  upon  the  character 
of  investments  allowed  to  the  National  Bank.  It  is  in 
these  restrictions  that  the  charter  shows  the  influence  of 
the  difficulties  which  were  encountered  by  the  Bank  of 
Belgium  and  the  Societe  Gcnerale  in  attempting  to  main- 
tain a  note  issue  on  the  basis  of  general  financial  opera- 

a  Documents  Parlementaires:  1900,  p.  400. 

37 

■^    <    r-   >■»  r-i 

'    )  0  i 


National     Monetary     Commission 

tions.  Article  VIII  of  the  law  of  May  5,  1850,  confined 
the  Bank  to  strictly  commercial  operations — that  is,  to 
investments  in  commercial  paper  and  bills  of  exchange. 
The  Bank  was  indeed,  by  this  article,  authorized  to  make 
advances  in  current  account  or  for  short  terms  on  deposits 
of  national  securities  or  other  securities  guaranteed  by  the 
State,  but  even  this  moderate  privilege  of  tying  up  assets 
in  securities  representing  fixed  capital  was  to  be  confined 
"  within  limits  and  conditions  to  be  fixed  periodically  by 
the  administration  of  the  Bank,  jointly  with  the  council 
of  censors  and  the  approval  of  the  Minister  of  Finance." 
Apart  from  this  restricted  power  to  invest  in  securities 
and  the  broader  power  to  invest  in  commercial  paper,  the 
Bank  was  authorized  by  Article  VIII  to  engage  only  in 
those  operations  which  are  a  usual  prerogative  of  commer- 
cial banks  and  do  not  involve  the  risk  of  locking  up  assets — 
transactions  in  gold  and  silver;  the  collection  of  commer- 
cial paper  for  clients ;  the  acceptance  of  deposits ;  and  the 
holding  of  securities,  precious  metals,  and  money  on 
deposit  and  trust. 

All  other  classes  of  operations  were  prohibited  to  the 
Bank.  These  prohibitions  were  specially  enumerated  in 
Article  IX  of  the  law  of  1850.  The  Bank  could  neither 
borrow  nor  make  loans  on  mortgages  nor  on  the  deposit  of 
industrial  shares.  It  could  not  lend  on  its  own  shares  nor 
buy  them.  It  was  not  permitted  to  take  part,  directly 
or  indirectly,  in  industrial  enterprises,  to  engage  in  any 
form  of  commerce  except  that  in  gold  and  silver,  or  to 
acquire  any  real  property  except  such  as  might  be  strictly 
required  for  its  offices  and  necessary  business. 

To  these  restrictions  the  Bank  has  been  strictly  held. 
Indeed,  so  rigid  was  the  interpretation  put  upon  its  powers 

38 


National      Bank       of      Belgium 

that  at  the  time  of  the  revision  of  the  charter  in  1872  the 
central  committee  of  the  Chamber  of  Deputies  in- 
quired of  the  Government  whether  it  was  true  that  the 
Bank  was  refusing  to  discount  paper  based  upon  pur- 
chases of  material.  In  replying  to  this  inquiry,  the  Gov- 
ernment submitted  a  circular  issued  by  the  Bank  under 
date  of  January  21,  1862,  which  recommended  to  the 
discount  offices  to  refuse  paper  coming  under  the  following 
heads :  "■ 

"I.  Bills  arising  from  payment  for  real  estate  or  which 
have  their  origin  in  real  estate  transactions. 

"II.  Promissory  notes  or  bills  to  order  signed  by  indi- 
viduals who  are  not  merchants  nor  manufacturers,  even 
when  such  bills  are  presented  by  bankers  or  brokers. 

"III.  Bills  evidently  having  their  origin  in  the  con- 
struction or  enlargement  of  mills  or  their  equipment,  the 
execution  of  public  works,  or  any  other  investment  in 
fixed  capital  (immobilisation  de  capital) . 

"IV.  Bills  signed  for  investing  the  proceeds  in  indus- 
trial corporations  or  for  the  purchase  of  shares  in  such  cor- 
porations. 

"  V.  Finally,  bills  signed  for  the  renewal  of  others  which 
have  matured  or  are  about  to  mature." 

In  explaining  the  appHcation  of  this  circular,  the  cen- 
tral committee  which  was  reporting  on  the  renewal  of  the 
charter  said: 

"The  somewhat  too  general  terms  of  the  third  provision 
have  led  to  some  misapprehension  upon  the  extent  of  the 
restriction.  The  Bank  has  never  applied  this  requirement 
in  the  sense  that  the  manufacturer  of  machinery,  for 
instance,  who  deals  with  a  manufacturer  for  the  materials 


o  Documents  Officiels:   1872,  p.  81. 
39 


National     Monetary     Commission 

which  are  furnished  to  him,  can  not  discount  his  draft.  This 
constitutes  a  commercial  sale  which  falls  within  the  opera- 
tions of  the  Bank ;  but  it  would  be  otherwise  if,  instead  of 
having  recourse  to  the  Bank  to  discount  paper  which  rep- 
resented a  transaction  already  made,  it  was  sought  to 
obtain  the  credit  necessary  for  the  building  or  enlargement 
of  factories.  This  would  constitute  an  operation  of  part- 
nership which  would  fall  outside  the  scope  of  the  affairs  of 
a  bank  of  issue.  Thus  understood,  the  decision  of  the 
Bank  appears  to  be  beyond  criticism." 

The  only  change  made  in  these  practices  by  the  law  of 
March  26,  1900,  was  the  addition  of  a  provision  bringing 
certain  agricultural  transactions  within  the  definition  of 
acts  of  commerce.  It  was  provided  by  Article  XI  of  the 
new  law  as  follows: 

"There  shall  be  considered  as  operations  of  commerce 
under  the  terms  of  Article  VIII,  section  i,  of  the  law  of 
May  5,  1850,  purchases  and  sales  made  by  farmers  and 
to  them  of  cattle,  agricultural  implements,  fertilizers, 
seed,  crops,  and  generally  merchandise  and  supplies 
relating  to  the  exercise  of  their  industry." 

The  usual  provisions  are  made,  however,  in  regard  to 
real  estate  or  mortgages  taken  as  security  for  loans  which 
are  found  to  be  unsound.  Article  XXXIX  of  the  stat- 
utes of  1 900  is  as  follows : 

"The  Bank  may  accept  by  way  of  a  pledge,  mortgage, 
or  security  real  estate  and  other  property  to  protect  obli- 
gations which  are  doubtful  or  overdue.  Such  real  estate 
and  property  must  be  alienated  within  a  period  of  two 
years,  unless  the  Minister  of  Finance  grants  a  longer 
term." 


40 


National       Bank      of        Belgium 

The  statutes  of  the  Bank  defined  more  particularly 
the  character  of  the  paper  to  be  discounted  and  the  terms 
of  discount.  The  language  of  the  law,  "securities  easily- 
con  vertible,"  is  supplemented  by  the  following  provisions 
of  Article  XXVI  of  the  statutes: 

"There  shall  be  discounted  only  commercial  paper  to 
order,  stamped,  based  upon  an  actual  operation  (ay ant 
une  cause  reelle)  maturing  in  not  more  than  one  hundred 
days  and  guaranteed  by  three  solvent  signatures." 

Two  exceptions  are  made  to  the  rule  of  three  signatures. 
The  first  declares  that  commercial  paper  with  two  sig- 
natures may  be  admitted  in  such  manner  and  under  such 
conditions  as  may  be  determined  by  rules  framed  by  the 
general  council  and  approved  by  the  Minister  of  Finance. 
The  second  provides  that  a  pledge  in  the  form  of  a  war- 
rant or  merchandise,  sufficient  to  meet  the  whole  of  the 
credit,  may  take  the  place  of  two  of  the  signatures.  The 
three  articles  approved  by  the  Minister  of  Finance  con- 
cerning admission  of  paper  with  two  signatures  are  as 
follows : 

"I.  The  Bank  does  not  accept  paper  with  two  signa- 
tures coming  from  agencies;  but  the  signatures  of  the 
comptoir  (or  discount  office)  may  constitute  the  third 
signature. 

"II.  In  the  case  of  signatures  coming  from  a  branch, 
the  Bank  accepts  only  those  of  persons  borne  on  the  list 
prepared  each  year  by  the  council  of  administration  of 
the  Bank  upon  the  proposal  of  the  administration  of  the 
branch,  including  the  discount  committee. 

"The  administrators  of  a  branch  do  not  accept  paper 
with  two  signatures,  when  there  is  opposition  on  the  part 

41 


National     Monetary     Commission 

of  one  of  them,  without  referring^  it  to  the  council  of  ad- 
ministration of  the  Bank. 

"  III.  Paper  with  two  signatures  presented  at  Brussels 
shall  be  accepted  only  if  the  directors  are  unanimous  or 
if  the  opposition  does  not  represent  a  third  of  those  vot- 
ing, and,  in  the  absence  of  unanimity,  upon  the  condi- 
tion that  the  discount  committee  has  not  been  unfavor- 
able to  the  acceptance  of  the  paper." 

The  system  pursued  in  discounting  paper  approved  by 
a  discount  ofhce  at  the  same  rate  of  discount  as  that  hav- 
ing three  signatures  differs  in  some  respects  from  the  sys- 
tem at  other  European  banks,  where  merchants  often 
obtain  the  three  signatures  required  by  the  payment  of 
a  commission  to  a  banker. 

A  significant  indication  of  the  tendency  to  persuade 
banks  of  issue  to  accept  securities  other  than  those  grow- 
ing out  of  actual  commercial  operations  was  afforded  by 
the  debate  in  the  Chamber  of  Deputies  on  the  renewal 
of  the  charter  in  1900.  The  contest  made  by  M.  de 
Somz^e  turned  nominally  upon  the  question  of  three 
signatures,  but  much  of  this  argument  was  directed  to 
the  contention  that  paper  which  was  discounted  might 
be  based  upon  the  deposit  of  securities.  M.  de  Somzee 
declared  that  under  the  existing  policy  the  third  signa- 
ture was  usually  that  of  a  banker  who  was  in  effect  only 
an  intermediary  between  the  maker  of  the  paper  and  the 
National  Bank.  The  bankers  who  lent  their  aid  with  the 
National  Bank  considered  two  signatures  sufficient  to  pro- 
tect them  against  loss.  Hence  they  gathered  the  profits 
of  their  intervention  in  some  measure  without  risk,  and 
thus  absorbed  uselessly  a  part  of  the  profits  of  the  manu- 

42 


National      Bank       of      Belgium 

facturer,  the  merchant,  and  the  laborer.  The  figure  of 
18,000,000  francs  had  been  cited  as  the  amount  of  prof- 
its made  annually  by  bankers  simply  by  giving  their  sig- 
natures, but  this  calculation  did  not  apparently  include 
the  exactions  arising  from  emergencies  and  caprice,  by 
which  the  bankers  maintained  their  domination  over 
at  least  a  part  of  their  clientele,  often  the  least  favored 
by  fortune  and  the  most  numerous.  It  was  charged  by 
M.  de  Somzee  that  the  requirement  of  three  signatures 
was  only  too  often  exercised  in  favor  of  certain  merchants 
and  manufacturers  favored  by  the  private  banks,  who 
considered  only  their  own  interest  and  preferences. 

It  was  declared  that  nothing  was  easier  than  to  abandon 
the  requirement  of  the  third  signature.  The  National 
Bank,  through  its  numerous  branches,  was  able  to  be  as 
well  informed  as  the  private  banks.  If  the  principle  of 
two  signatures  was  admitted,  it  would  involve,  evidently, 
not  the  acceptance  exclusively  of  public  funds,  but  also 
mortgage  obligations  and  deposits  of  industrial  securities, 
which  should  be  accepted  according  to  a  method  to  be 
prescribed  in  the  regulations  reorganizing  the  operations 
of  the  Bourse.  Such  securities  should  have  been  quoted 
during  a  period  of  at  least  two  or  three  years,  and  should 
be  admitted  at  a  rate  which  should  not  be  less  than  50 
per  cent,  for  instance,  of  the  quotation  corresponding  to 
an  average  taken  during  this  entire  period.  It  was  sug- 
gested by  M.  de  Somzee  that  if  the  third  signature  was  no 
longer  required,  the  bank  might  collect  a  small  commission 
supplementary  to  the  regular  discount  rate,  and  from  the 
amount  thus  collected  create  an  insurance  fund  to  cover 
possible  losses.     At  the  end  of  several  years,  if  this  fund 

43 


National     Monetary     Commission 

attained  an  amount  considered  by  the  Government  to  be 
sufilcient,  the  excess  might  be  covered  into  the  funds  for 
old-age  pensions  or  laborers'  insurance.'* 

The  proposals  of  M.  de  Somzee  were  not  acceptable  to 
the  Government.  It  was  pointed  out,  in  the  elaborate 
report  made  to  the  Senate  by  the  committee  on  finance 
and  public  works  by  the  Chevalier  Descamps,  that  the 
real  point  of  the  amendment  was  to  make  discount  with 
two  signatures  under  certain  conditions  obligatory. 
Otherwise  it  would  have  no  point,  because  the  government 
of  the  Bank  already  had  the  authority  to  discount  paper 
with  only  two  signatures  when  it  was  acceptable.  M.  de 
Somzee  also  ran  the  risk  of  injuring  those  whom  he 
wished  to  serve  by  exposing  them  to  the  rejection  of  paper 
which,  if  it  bore  a  third  signature,  might  be  accepted. 
Finally  the  standard  of  security  proposed  for  the  admis- 
sion of  paper  of  two  signatures  was  far  from  being  irre- 
proachable in  itself  from  the  point  of  view  of  the  require- 
ments imposed  upon  a  bank  of  issue.'' 

VOLUME   AND   CHARACTER   OF   DISCOUNTS. 

The  volume  of  domestic  discounts  has  tended  to  increase 
at  the  National  Bank  of  Belgium  in  spite  of  the  competi- 
tion of  the  joint-stock  banks.  The  foreign  bills  dis- 
counted have  increased  in  proportion  to  the  domestic  bills, 
as  is  set  forth  under  the  discussion  in  regard  to  the  em- 
ployment of  foreign  bills  in  the  reserve.  The  limitation 
of  the  business  of  the  Bank  to  commercial  discounts,  with 
only  slight  exceptions  for  loans  on  treasury  bonds  and 

a  Discussions  Parlementaires:   1900,  pp.  333-337. 
b  Documents  Parlemenlaires:  1900,  p.  405. 


44 


National       Bank       of      Belgium 

advances  on  public  funds,  makes  the  classification  of  the 
loans  comparatively  simple.  The  following  table  shows 
the  total  number  of  pieces  of  paper  discounted  and  the 
total  amoimt,  for  representative  years,  with  the  domestic 
discounts  separately  stated: 

Volume  of  discounts 


Year. 


170,39s 
382.831 
80s, 109 
I, 064. 281 
I,  153,032 
1.311.569 
I, 444. 178 

1,  628,  979 

2,  206,  651 
2,  736,  174 


1851 

185s 

i860 

186s 

1870 

1871 

1872 

1873 

1875 

1880 - 

i88s--- 

1890 j     3.095-360 

1895 !     3,206,579 

1900 

1901 

1902 

1903 

1904-- 

190S 

1906 

1907-- 

1908 


Total  discounts. 


Domestic  discoimts. 


Pieces 
discounted. 


Pieces 
discounted. 


Amount. 


3.  797.627 
3.892,83s 
3.974. 785 
4,007. 183 
4,094,  IIS 
4, 224, 278 
4,410,492 
4,500,939 
4,450,433 


Francs. 

186, 200, 

484, 600, 

757,600, 

898, 100, 

1,337.  000, 

1,522,  000, 

1,853,  200, 

2,  019,  300, 

1,  916,  900, 
1 , 994. 600, 

2,  088,  600, 
2,355.514. 
2,894,249, 
3,442,889, 
3.370,838, 
3,428,  962, 
3.635.330, 
3,603,  us, 
3,861,90s, 
4,  255,516. 
4,  449,  748. 
4,362,48s, 


000 

000 

000 

000 

000 

000  I 

000 

000 

000 

000 

000 

327 
929 
721 
904 
667 
287 

198 
820 
809 

475 
297 


157.578 
380,  237 
804,  037 
1.052,  792 
I,  152,  894 
1,304.969 
I,  442,340 
I. 625, 820 
2, 185, 914 
2. 716, 208 
3.079.937 

3.  182.551 
3. 776. 123 
3.869,987 
3.951,  190 
3.984. 794 
4. 071, 016 
4. 200, 269 
4,388.858 

4.  481,032 
4,426, 649 


Francs. 

81,  400, 

358,000, 

729,500, 

816, 400, 

1,  205, 100, 

I,  519,  600, 

I,  727,  400, 

I,  952,  000, 

I, 832, 100, 

I,  647, 000, 

I,  666.  200, 

1,  958, 620, 

2.  168,085, 
2,  749,  708. 
2,551,426, 
2,  616,  742, 
2,  882,  497, 
2,8ss,435, 
3,082,823. 
3.405.998, 
3,525, 125, 
3.055.89s. 


000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
883 
897 
627 
453 
522 
681 
893 
161 
103 
142 


The  Belgian  paper  discounted  by  the  National  Bank 
consists  chiefly  of  two  classes — accepted  paper  and  non- 
accepted  paper  and  promissory  notes.  In  addition  to 
these  two  principal  classes,  however,  there  are  some  oper- 
ations in  purchase  and  sale,  loans  upon  warrants,  and 
loans  upon  treasury  bonds.     The  accepted  paper  plays 


45 


National     Monetary     Commission 

usually  the  largest  part  in  the  amount  of  discounts,  but 
as  it  represents  much  larger  transactions  than  the  unac- 
cepted the  number  of  such  transactions  is  less.  As 
acceptances  are  in  vogue  to  only  a  limited  extent  in  tlie 
United  States,  it  may  throw  light  on  their  character  to 
quote  here  the  definition  of  acceptance  given  in  a  French 
dictionary  of  commerce  and  based  upon  the  French  com- 
mercial code.     This  definition  is  as  follows :  " 

"Acceptance. — This  is  the  act  by  which  the  person 
drawn  upon  engages  to  pay  the  amount  of  a  letter  of  ex- 
change to  the  person  who  may  be  at  maturity  the  regular 
holder  of  such  letter.  It  is  accomplished  by  the  indorse- 
ment on  the  letter  of  exchange  made  by  the  drawee  of  his 
signature,  preceded  or  not  with  the  word  '  accepted '  (art. 
122).  Acceptance,  besides  the  general  conditions  rela- 
tive to  consent,  must  be  the  work  of  a  person  capable  of 
obligating  himself  by  a  letter  of  exchange.  It  may  be 
partial,  but  not  conditional  (art.  124).  Its  effect  is  to 
create  an  obligation  on  the  part  of  the  drawee  toward 
the  holder  at  maturity,  with  all  the  consequences  attached 
by  law  to  obligations  arising  from  a  letter  of  exchange." — 
Commercial  Code,  arts.  1 18-125. 

The  employment  of  accepted  paper  is  a  common  feature 
of  European  banking,  because  the  fact  of  acceptance  gives 
it  a  better  standing  and  more  ready  convertibility.  Hence, 
as  stated,  accepted  paper  has  usually  exceeded  the  non- 
accepted  paper  in  the  transactions  of  the  National  Bank  of 
Belgium,  although  the  unaccepted  has  represented  a 
much  larger  number  of  pieces.     The  ratio  of  accepted 

o  Dictionnaire  du  Commerce,  de  1' Industrie  et  de  la  Banque:  Yves 
Guyot  et  A.  Raffalovich,  I.,  p.  22. 

46 


National      Bank       of      Belgium 

and  nonaccepted  paper  drawn  upon  Belgium  for  represent- 
ative years  appears  in  the  following  table: 

Character  of  paper  discounted. 


1892 
1897 
1900 
1904 
190s 
1906 
1907 
1908 


Accepted  paper. 


j       Nonaccepted  paper  and 
I  promissory  notes. 


Number. 


494, 793 
504, 198 
532.419 
538. 145 
551.077 
583.815 
592,371 
576.805 


Francs. 
<)26,  542.  297 
I. 145. 970. 512 
1,441.  732.  237 
I,  238. 316. 36s 
1.335.946,  216 
1.517.385.827 
1.595.977.459 
I, 259, 104, 156 


Number. 


2,499.844 
2.913.567 
3, 242, 271 
3.530,028 
3, 646, 804 
3, 801, 144 
3,885, 186 
3,846,641 


Amount. 


Francs. 
762,  891,  soo 
887,  720,  956 
I,  120,  008,  3n 
1,092,  763,035 
I,  136,  170,455 
I,  246,  208,  350 
1.302,  572,  748 
I, 245, 146, 069 


The  average  value  of  accepted  paper  per  piece  differs 
widely  from  that  of  nonaccepted,  because  the  former  comes 
largely  from  responsible  houses  engaged  in  foreign  trade 
and  the  latter  includes  many  small  discounts  granted 
to  retail  tradesmen.  Thus  the  average  for  the  accepted 
paper,  largely  consisting  of  foreign  bills,  ranges  between 
$400  and  $500,  while  for  the  nonaccepted  paper  the 
average  value  is  nearer  $60.  The  variations  from  year 
to  year  in  the  average  value  have  not  been  of  special 
significance  in  recent  years.  They  have  not  brought 
down  the  average,  which  is  already  nearly  as  low  as  that 
of  the  Bank  of  France.  Statistics  are  not  given  regu- 
larly in  the  annual  reports  of  the  number  of  small  bills, 
but  as  early  as  1887  more  than  three-quarters  of  the  whole 
number  of  discounts  were  for  amounts  under  500  francs 
($96.50).  In  1899  this  proportion  had  risen  to  81  per 
cent.     Upon   the   facihties   afforded   in   this   regard   the 


47 


National    Monetary     Commission 

report  of  the  Chevalier  Descamps  to  the  Senate  made 
these  observations:'* 

"It  should  be  first  remarked  that  in  all  the  banks  of 
issue  of  Europe  small  commercial  bills  are  taxed  with 
a  minimum  interest  charge  or  are  subject  to  a  minimum 
limit.  The  National  Bank  has  established  a  minimum 
neither  for  the  amount  of  such  paper  nor  for  the  interest 
to  be  collected.  This  is  an  advantage  always  more  and 
more  beneficial  for  small  transactions.  In  effect,  the 
creation  of  popular  banks  and  unions  of  credit,  as  well  as 
the  facilities  which  certain  retail  houses  grant  to  their 
clients  for  weekly  or  monthly  payments,  have  quintupled 
within  a  few  years  the  number  of  small  bills.  Statistics 
based  upon  a  sufficiently  long  period  demonstrate  that 
such  small  bills  fill  the  assets  of  the  bank  in  the  following 
proportions : 

"Of  the  number  of  commercial  bills  admitted  to  dis- 
count, 14  per  cent  are  for  less  than  50  francs;  32  per  cent 
are  for  less  than  100  francs;  58  per  cent  are  for  less  than 
200  francs;  70  per  cent  are  for  less  than  300  francs;  76 
per  cent  are  for  less  than  400  francs ;  8 1  per  cent  are  for 
less  than  500  francs. 

"Being  given  the  proportion  of  paper  of  less  than  100 
francs  admitted  to  discount,  with  a  minimum  of  ten  days' 
interest,  on  the  15th  and  30th  of  each  month,  it  is  easy 
to  comprehend  the  discount  facilities  accorded  to  small 
paper,  for  which  the  interest  collected  is  far  from  com- 
pensating the  cost  which  is  imposed  by  its  collection. 

"In  no  other  bank  does  the  small  commerce  enjoy  a 
like   privilege.     The  Bank  of  France  levies   a  minimum 


a  Documents  Parlementaires :  1900.  p.  415. 
48 


National      Bank      of      Belgium 

of  lo  centimes  per  bill.  The  Imperial  Bank  of  Germany 
levies  lo  pfennigs  per  loo  marks.  The  Bank  of  the 
Netherlands  levies  a  minimum  interest  of  fifteen  days. 
The  Bank  of  Italy  charges  i  franc  per  bill  and  five  or 
ten  days'  interest  according  to  locality.  The  Bank  of 
Switzerland  levies  50  centimes  per  bill  and  fifteen  days* 
interest." 

The  average  maturity  of  paper  discounted  at  the  Bank 
of  Belgium  illustrates  the  rule  which  prevails  at  other 
central  banks  of  Europe — that  the  maturities  are  much 
within  the  legal  Umit,  chiefly  by  reason  of  rediscounts. 
The  maximum  limit  of  paper  which  can  be  discounted 
at  the  National  Bank  is  one  hundred  days,  but  the  high- 
est average  for  accepted  paper  during  the  past  dozen 
years  has  been  forty-six  days  and  for  nonaccepted  paper 
forty-three  days.  The  range  of  variation  for  accepted 
paper  has  been  from  thirty-nine  to  forty-six  days  and 
for  nonaccepted  paper  from  thirty-seven  to  forty-three 
days.  These  variations  are  all  so  far  within  the  limit 
of  convertibility  that  they  are  not  of  great  significance. 
There  was  a  tendency  to  the  shortening  of  the  period  of 
maturity  during  the  early  history  of  the  Bank,  but  as  the 
term  in  1866  was  only  fifty-four  days,  the  margin  of 
possible  reduction  was  small  and  was  practically  attained 
in  1880,  when  the  average  term  was  forty-five  days.  If 
any  deduction  is  to  be  drawn  from  the  increase  of  the 
period  during  which  bills  discounted  have  to  run  in  such 
a  year  as  1908,  it  is  probably  that  persons  having  paper 
were  desirous  of  converting  it  into  currency  or  banking 
credit  more  promptly  than  under  easier  money  market 
conditions.     The   figures   which   appear  below  represent 

85519— I  "T 4  49 


National     Monetary     Commission 

only  an  average,  based  upon  the  amount  of  paper  run- 
ning for  dififerent  periods.  This  leaves  room  for  some 
paper  of  much  longer  maturities  and  for  some  of  much 
shorter  maturities.  The  following  table  shows  the 
averages  for  recent  years : 

Average  values  and  maturities  of  discounts. 


Accepted  paper. 


Nonaccepted  paper. 


Average 

value  per 

piece. 


Average 
maturity. 


Average 

value  per 

piece. 


Average 
maturity. 


1892 
1896 
1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 
190s 
1906 
1907 
1908 


Francs 
1.872.59 
2.  117-47 
2.  272.  86 
2,  231.  79 
2,449.  27 
2,  707.  89 
2.310.  76 
2,  320.  26 
2.390.51 
2,  301.  08 
2,  276.59 
2,599.08 
2, 694. 22 
2,  182.88 


Days. 
39^3 
43 
42 
43 
41 
39 
42 
42 
43 
44 
44 
45 
45 
46 


Francs. 
305- 18 
296.68 
304.69 
308.46 
332.63 
345-44 
332.81 
314-94 
308.  00 
309- 57 
300.  40 
327-85 
335- 26 
323-69 


Days. 
42^ 
39 
38 
39 
37 
37 
40 
40 
41 
41 
41 
43 
42 
43 


It  was  contended,  in  the  debates  over  the  charter  of 
1900,  that  the  Bank  should  pursue  on  a  larger  scale  the 
policy  of  direct  discounts  and  as  a  means  to  this  end  should 
abandon  in  the  case  of  good  commercial  paper  the  require- 
ment of  three  signatures.  The  benefits  to  the  merchant 
arising  from  this  change,  according  to  M.  Bertrand,  one  of 
the  most  vigorous  critics  of  the  Bank,  were  that  he  would 
obtam  the  benefit  of  the  minimum  discount  rate,  instead 
of  paying  always  i  per  cent  above  this  rate  to  the  bankers. 
The  Bank,  it  was  declared,  would  benefit  on  its  side  by 


50 


National      Bank      of      Belgium 

deriving  an  income  during  the  whole  period  for  which  the 
paper  ran,  instead  of  during  the  short  period  for  which  it 
was  discounted.  The  larger  banks,  M.  Bertrand  declared, 
which  have  considerable  resources,  remit  paper  to  the 
National  Bank  only  ten  days  before  maturity.  The  sav- 
ing in  discount  to  the  mercantile  community  by  direct 
discount  at  3  per  cent  in  lieu  of  6  per  cent  usually  paid  to 
bankers  was  estimated  at  18,000,000  francs  ($3,474,000)." 

The  three  classes  of  obligations  discounted,  apart  from 
commercial  paper,  represent  a  minor  part  in  the  total 
volume  of  business,  but  an  amount  not  entirely  insignifi- 
cant. The  operations  of  "purchase  and  sale"  represent 
banking  securities  on  foreign  countries  which  can  not  be 
collected  by  the  bank  itself  and  are  therefore  discounted 
on  condition  of  being  purchased  back  by  the  discounters 
before  they  become  due.''  Only  bills  which  have  been 
accepted  are  admitted  to  this  class  of  operations.  These 
operations  were  larger  fifteen  years  ago  than  the  other 
two  classes  of  operations  combined,  but  the  admission 
of  warrants  to  discount  in  1886  has  been  followed  by 
considerable  development  in  loans  of  this  character. 

Operations  in  purchase  and  sale  in  1892  numbered  168 
and  amounted  to  123,502,708  francs  ($23,840,000).  The 
number  of  such  operations  had  risen  in  1900  to  616,  but 
the  amount  had  fallen  to  111,061,399  francs.  Operations 
of  this  character  were  more  extensive  in  1905,  when  the 
number  was  778  and  the  amount  was  430,063,247  francs 
($83,000,000);  but  there  was  a  decline  in   1906  to  890 

o  Discussions  Parlementaires:   1900,  pp.  5-8. 

b  London  Bankers'  Magazine,  September,  1908,  LXXXVI,  p.  369. 


51 


Natl  0)1  a  I     Monetary     Commission 

operations,  representing  a  total  of  412,022,772  francs;  in 
1907  to  667  operations,  representing  an  amount  of 
327,686,893  francs;  and  in  1908  to  502  operations,  repre- 
senting an  amount  of  177,501,217  francs  ($34,250,000). 

It  was  not  until  1886  that  the  National  Bank  admitted 
warrants  to  discount.  The  principle  of  such  operations 
was  combated  very  energetically  at  the  time  of  the  dis- 
cussion of  the  law  of  1872  by  M.  Frere-Orban,  former 
president  of  the  council,  as  incompatible  with  the  con- 
ditions of  a  well-conducted  bank  of  issue.  He  declared 
at  the  sitting  of  May  i,  1872:" 

"The  bank  ought  not  to  discount  warrants,  because 
they  are  not  securities  immediately  realizable.  It  is  an 
operation  which  can  and  ought  to  be  carried  on,  but  by 
other  institutions  than  the  National  Bank.  Such  opera- 
tions would  be  of  a  nature  to  compromise,  at  a  given  mo- 
ment, the  circulation  and  the  convertibility  of  notes,  for 
warrants  are  not  securities  which  are  immediately  and 
easily  realizable." 

Notwithstanding  this  reasoning,  warrants  were  admit- 
ted to  discount  in  1886,  and  reached  in  1887  6,034,705 
francs.  The  total  number  of  warrants  discounted  during 
the  year  1908  was  2,687  Q-^d  the  amount  was  289,143,846 
francs  ($55,800,000).  This  represented,  however,  less 
than  10  per  cent  of  the  total  discounts  in  Belgium,  which 
were  3,055,895,288  francs  ($589,770,000).  The  progress 
of  operations  in  warrants  is  shown  in  the  following 
table : 

a  Noel,  I.,  p.  519. 


52 


National      Bank      of      Belgium 


operations  in  warrants. 


Amount. 


1887. 
1892. 
1897- 
1900. 
190s- 
1906. 
1907. 
1908. 


Warrants  admitted  to  discount  must  be  guaranteed  by 
two  solvent  signatures  and  accompanied  by  evidence  that 
the  goods  involved  are  deposited  in  warehouses  possessing 
every  condition  of  security.  They  must  be  insured  and 
authority  must  be  given  the  bank  to  take  samples.  The 
rate  of  advance  is  fixed  provisionally  at  75  per  cent  of  the 
amount  of  the  warrant.  The  articles  on  which  warrants 
are  regularly  admitted  to  discount  are : " 


Steel,  in  bars. 

Indigo. 

Building  timber. 

Ivory. 

Coffee. 

Jute. 

Hemp. 

Wool,  raw  and  washed 

Raw  cotton. 

Flax. 

Raw  hair. 

Indian  corn. 

Hides,  salted. 

Nitrate  of  soda. 

Copper. 

Lead. 

Tin. 

Rice. 

Tow. 

Stearin. 

Flour. 

Sugar. 

Iron  ore  and  pig  iron. 

Fats  and  oils. 

Castings. 

Leaf  tobacco. 

Madder. 

Tea. 

Gums. 

Zinc. 

Grains. 

The  discount  of  warrants  involving  other  merchandise 
must  be  the  subject  of  special  arrangement. 

oR6sum6  des  Operations  Effectu^es  par  la  Banque,  pp.  30,  31. 

53 


National     Monetary     Commission 

ADVANCES  ON  PUBLIC  FUNDS. 

Loans  upon  public  funds  by  the  National  Bank  are 
carefully  restricted  in  amount  and  duration.  It  is  pro- 
vided by  Article  VIII  of  the  existing  charter  that  among 
the  operations  of  the  Bank  may  be  "making  advances  on 
current  account  or  for  short  terms  upon  the  deposit  of 
national  public  securities  or  other  securities  guaranteed  by 
the  State,  within  limits  and  conditions  to  be  determined 
periodically  by  the  administration  of  the  Bank,  jointly 
with  the  council  of  censors,  with  the  approval  of  the 
Minister  of  Finance." 

Such  loans  can  be  made  to  solvent  persons  only  and  for 
a  term  not  less  than  ten  days  nor  exceeding  four  months. 
Securities  will  not  be  accepted  for  more  than  four-fifths 
of  their  market  value  and  may  be  sold  on  the  Bourse  if 
the  loans  are  not  repaid  at  maturity.  No  more  than  one 
renewal  is  permitted,  unless  by  special  authority  given 
by  the  council  of  administration.  Loans  for  more  than 
ten  days  may  be  paid  before  maturity,  with  remission  of 
interest  for  all  but  two  days  of  the  time  for  which  they 
have  yet  to  run.  The  amount  and  the  rate  of  loans  to 
be  made  upon  the  deposit  of  public  funds  is  required  to 
be  fixed  each  week." 

It  is  to  be  noted  that  not  only  are  these  loans  treated  as 
payable  at  short  maturities,  like  commercial  paper,  but 
they  are  strictly  limited  to  public  funds  or  securities 
guaranteed  by  the  State.  The  bonds  and  stocks  of  private 
railway  corporations  not  guaranteed  and  of  manufacturing 
and  industrial  corporations  are  thus  rigidly  excluded  from 

<»  Statuts,  art.  25 


54 


National      Bank      of      Belgium 

the  list  of  securities  accepted  at  the  Bank.  Holders  of 
such  securities  must  seek  accommodation  from  the  Societe 
Generale  or  other  private  and  joint-stock  banks. 

The  classes  of  securities  upon  which  the  Bank  lends  are 
the  Belgian  public  debt,  bonds  of  the  treasury,  securities 
of  the  annuity  bank  issued  by  the  State  and  countersigned 
by  the  treasury,  and  bonds  of  the  National  Company  of 
Local  Railways.  The  preferred  shares  and  the  bonds  of 
the  Antwerp  and  Ghent  Railway  Company  and  the  bonds 
of  several  other  roads,  when  bearing  the  indorsement  of 
the  treasury,  are  also  included  in  the  list.  There  has  been 
some  discussion  in  regard  to  the  inclusion  of  securities  of 
the  Company  of  Communal  Credit.  These  securities  have 
been  excluded,  however,  upon  the  ground  that  the  inter- 
vention of  the  State  in  regard  to  them  did  not  constitute 
a  guarantee  in  the  strict  sense  of  the  word,  although  it 
might  be  considered  as  a  quasi  guaranty." 

Acting  under  the  authority  to  make  loans  of  this  char- 
acter, the  Bank  usually  has  outstanding  an  amount  which, 
while  considerable  in  itself,  has  rarely  exceeded  the  com- 
bined amount  of  the  capital  and  reserves  and  has  consti- 
tuted a  very  small  percentage  of  total  assets.  As  far 
back  as  1866  the  average  amount  of  such  loans  was 
21,131,325  francs  ($4,080,000).  The  amount  was  some- 
what less  during  the  next  few  years,  but  the  average  rose 
during  the  troubled  year  1873  to  28,768,293  francs,  to  fall 
again  during  the  next  three  years,  but  after  that  to  remain 
at  a  generally  higher  figure.  The  highest  average  attained 
in  the  early  history  of  the  Bank  was  in  1883,  when  the 
average     loans    of    the    year    were    96,175,980    francs 


<»  Documents  Parlementaires:  1900,  p.  430. 

5.5 


National     Monetary     Commission 

($18,562,000),  of  which  80,139,200  francs  was  lent  through 
the  head  office  at  Brussels.  The  occasion  of  such  large 
advances  was  the  collapse  of  the  copper  corner  and  the 
failure  of  the  Union  G^n($rale  in  Paris  in  1882.  The  aver- 
age of  advances  declined  in  1884  to  53,158,800  francs. 
The  totals  of  advances  upon  securities,  net  balances  at 
the  end  of  the  year,  and  the  net  earnings  of  the  Bank  from 
this  source  appear  for  representative  years  in  the  recent 
history  of  the  Bank  in  the  following  table: 

Advances  upon  public  securities. 


Year. 


Total  ad- 
vances. 


Outstanding 
Dec.  31. 


Net  earn- 
ings. 


1893 
1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 
1 90s 
1906 
1907 
1908 


Francs. 
41. 531. 45° 
74,  824, 100 
113,  628. 600 
236. 573. 348 
246,  311,  031 
189.342.s51 
166,956.63s 
159.  166.637 
171, 651, 920 
199.575.316 
251.  132,  467 
348,  754,247 
328,511,  148 


Francs. 

8,599.400 
21, 784, 200 
34,  150,000 
60, 072, 804 
58,373.083 
55,  270,662 
42,  200,  825 
34,015,830 
32,  208,  486 
38,011,413 
48,  766,437 
61, 716, 731 
51,419.  120 


Francs. 

233.895 

469, 816 

647.  55» 

1,513,204 

1.836,571 

1, 666, 171 

1,470,  131 

927.  234 

962,97s 

908, 727 

I,  214,  098 

I,  972,  206 

1.771.38s 


It  is  only  from  the  year  1900  that  a  separation  has  been 
made  in  the  published  reports  between  direct  loans  on 
the  pledge  of  public  funds  and  advances  on  current  ac- 
count secured  by  the  deposit  of  such  securities.  It  is 
only  within  a  few  years  that  loans  of  the  latter  class  were 
made  at  the  provincial  agencies."  The  proportion  of 
this  class  of  advances  has  risen  considerably  since  this 


o  Ulens,  Les  Banques  d'Emission,  p.  394. 


56 


National       Bank       of      Belgium 

change  and  was  especially  heavy  during  the  pressure  of 
1907,  Indeed,  under  both  classifications  the  figures  seem 
to  indicate  a  disposition  on  the  part  of  the  financial  com- 
munity to  avail  itself  to  the  utmost,  in  periods  of  mone- 
tary pressure,  of  the  facilities  granted  by  the  National 
Bank  for  obtaining  credit  upon  fixed  forms  of  capital, 
restricted  as  those  facilities  are  by  the  statutes  and  the 
policy  of  the  Bank.  The  amount  and  the  balances  of 
the  two  classes  of  loans  is  shown  for  representative  years 
in  the  following  table: 

Character  of  advances  on  securities. 


Year. 


Direct  loans 


Total  during 
year. 


Balance, 
Dec   31 


Advances  in  current 
account. 


Total  dming 
year. 


Balance 
Dec.  31. 


1900 
1902 
1904 
1 90s 
1906 
1907 
1908 


Francs. 

206, 123, 100 

ii6, 828, 250 

82,  874,  200 

79, 022, 600 

97.854,400 

166, 626, 400 

152, 416, 900 


Francs. 
40, 196, 100 
26, 995, 100 
17, 280, 000 
21,532,300 
27.  981,  700 
35.719,900 
23, 264, 400 


Francs. 

40.  187,931 

so, 128,38s 

88, 777, 720 

I20, 552, 716 

153, 278,067 

182,  127,  847 

176, 094, 248 


Francs. 
18.176.983 
IS, 20s, 72s 
14,928,  486 
16,479,  113 
20,  784,  737 
25.996,831 
28,  154.720 


Loans  on  securities  to  borrowers  who  are  not  merchants 
are  required  to  be  registered  at  the  cost  of  the  borrower 
at  the  rate  of  three-tenths  of  i  per  cent  of  the  amount 
lent.  The  distinction  between  those  who  are  merchants 
and  those  who  are  not  is  based  upon  the  terms  of  a  law  of 
May  5,  1872,  which  provides  that  "the  pledge  given  as 
security  for  a  commercial  engagement  confers  on  the 
creditor  the  right  of  securing  payment  from  the  thing 
pledged  in  preference  to  other  creditors,  when  such  right 


57 


National     Monetary     Commission 

is  established  in  conformity  with  the  methods  admissible 
in  commercial  matters  for  the  sale  of  articles  of  the  same 
nature  and  when  the  object  of  the  pledge  has  been  placed 
and  remains  in  the  possession  of  the  creditor  or  of  a  third 
person  agreed  upon  between  the  parties."  By  the  terms 
of  article  2074  of  the  Civil  Code,  which  affects  those  who 
are  not  merchants,  the  privilege  of  payment  from  the  pro- 
ceeds of  a  pledge  exists  only  where  there  is  a  public  act  or 
an  act  under  private  seal  duly  registered,  setting  forth 
the  sum  due  and  the  character  and  the  nature  of  the  arti- 
cles given  in  pledge,  or  a  statement  annexed  of  their  qual- 
ity, weight,  and  measure. " 

IvOSSES   AND   REJECTED   PAPER. 

In  response  to  a  question  submitted  to  the  Government 
at  the  time  of  the  renewal  of  the  charter  in  1900  it  was 
admitted  that  "the  National  Bank,  like  every  other  finan- 
cial establishment,  is  exposed  to  losses."  The  amount  of 
these  losses,  however,  as  set  forth  in  detail  from  1873  to 
1898,  were  small  in  comparison  with  the  entire  volume  of 
discounts.  Tables  were  submitted  for  each  half  year, 
showing  the  commercial  paper  which  was  then  in  default 
and  also  property  which  had  been  taken  as  security  for 
loans  which  had  not  been  paid  at  maturity.  Figures 
quoted  by  Professor  Denis  from  the  documents  of  1872 
showed  that  for  the  twenty  years  ending  with  187 1  the 
total  amount  of  paper  in  default  was  1,188,518  francs 
($230,000),  and  of  this  amount  361,768  francs  had  ulti- 
mately been  paid.* 

a  Documents  Parlementaires :   1900,  p.  432.  bibid.,  p.  84. 


58 


National       Bank       of      Belgium 

Taking  up  the  twenty-six  years  from  1872  to  1897  Pro- 
fessor Denis  stated  that  the  total  amount  of  paper  unpaid 
was  5,758,659  francs  ($1,111,000),  upon  which  896,601 
francs  ($173,000)  had  ultimately  been  paid.  The  net  loss, 
therefore,  was  4,862,058  francs  ($938,000),  or  an  average 
of  about  $36,100  per  year.  Comparing  this  with  the 
enormous  volume  of  paper  discounted  during  the  period, 
which  was  56,944,804,715  francs  ($10,990,000,000),  the 
proportion  of  loss  worked  out  at  nine  one-thousandths  of 
a  centime  to  100  francs  (0.009  P^^"  cent).  Similar  figures 
for  the  Bank  of  France  during  the  period  from  1870  to 
1890,  which  comprised  a  period  of  war,  showed  a  total 
loss  of  34,730,000  francs  in  total  transactions  of  175,000,- 
000,000,  making  the  loss  1.9  centimes  per  100  francs.  ** 

In  response  to  another  question  as  to  what  securities 
composed  the  item  in  the  accounts,  "  Securities  guaranteed 
or  to  be  realized,"  a  full  explanation  was  given  of  the 
acquisition  of  certain  amounts  of  landed  property  under 
foreclosure.  The  first  year  in  which  this  item  appeared 
in  the  balance  sheet  was  in  1881,  as  the  result  of  the  de- 
fault of  a  loan  in  Brussels,  where  some  property  was  taken 
on  the  Boulevard  Leopold  II.  It  was  felt  to  be  improper 
under  the  law  to  carry  the  value  of  this  property  in  ordi- 
nary assets.  The  administrative  council  decided,  there- 
fore, to  open  a  new  item  in  the  balance  sheet  entitled 
"Securities  guaranteed  or  to  be  realized."  To  this  ac- 
count was  transferred  all  real  property  acquired  to  secure 
the  bank  against  loss.  All  forms  of  slow  assets  were  even- 
tually carried  to  this  account. '' 


«  Documents  Parlementaires:  igoo,  p.  82.  6  Ibid.,  p.  185. 


59 


National    Monetary     C  ommis  s  io 


n 


The  annual  reports  of  the  Bank  set  forth  regularly  the 
commercial  paper  rejected  when  submitted  for  discount. 
The  policy  of  the  Bank  in  regard  to  loans  is  so  well  under- 
stood that  the  amounts  rejected  are  not  usually  large. 
The  following  table  gives  the  number  and  amount  of  such 
cases  for  representative  years: 

Commercial  paper  rejected. 


1892. 
1897. 

1900. 
1904. 
1 905  - 
1906. 
1907. 
1908. 


Pieces. 


Francs. 

3.040 


260 
412 
893 
132 
6S3 
578 
028 


Total 
amount. 


Francs. 
3.809,455 
3,060, 179 
3.753,554 
2,395,329 
2,641,577 
2,  640,  480 
2,603,  541 
2,  014,  044 


Amount  at 
Brussels. 


Francs. 
1,874,443 
I,  802,  663 

2, 723, S2I 
1.358,522 
1,571,851 
1,407,592 
1,567.397 
I,  085,  604 


DISCOUNT  POUCY   OF   THE    NATIONAL   BANK. 

The  National  Bank  of  Belgium  has  followed  a  policy  in 
fixing  the  rate  of  discount  which  has  conformed  in  a 
measure  to  the  English  policy  of  changing  the  rate  with 
changes  of  condition,  but  has  leaned  in  some  degree 
toward  the  French  policy  of  keeping  the  rate  uniform, 
except  under  the  pressure  of  great  necessity.  In  other 
words,  the  policy  pursued  has  been  midway  between  that 
of  the  two  great  institutions  named.  This  is  apparent 
from  the  table  given  by  Mr.  Palgrave,  showing  the  varia- 
tions in  the  rate  of  discount  at  five  principal  European 
banks  from  1844  to  1900,  the  figures  for  Belgium  cover- 


60 


National       Bank       of      Belgium 

ing  only  the  period  since  the  creation  of  the  National 
Bank  in  1850.     The  table  is  as  follows:  ** 

Number  of  variations  in  rate  of  discount. 


Bank  of — 

England 

France 

Germany. 

Holland. 

Belgium. 

1891  to  1900 

Total  variations  from  1844 
to  1900 

400 

9 

III 

36 
116 

23 
173 

13 
173 

The  average  rate  which  has  prevailed  at  the  National 
Bank  of  Belgium  has  not  been  high.  It  was  calculated 
as  having  averaged  from  1873  to  1899  2)-2)2)  P^r  cent.  The 
average  since  that  date  has  ranged  somewhat  higher,  as 
the  result  of  the  more  stringent  conditions  in  the  money 
market  which  followed  the  war  in  South  Africa.  The 
highest  annual  rate  attained  in  the  history  of  the  Bank 
was  during  the  panic  of  1873,  when  the  average  was  5.06 
per  cent.  The  next  highest  rate,  prior  to  the  crisis  of 
1907,  was  4.42  per  cent,  in  1882,  when  the  crash  of  the 
Union  Generale  in  Paris  caused  disturbances  throughout 
Europe.  An  average  rate  of  2.80  per  cent  was  touched 
in  1886  and  of  2.70  per  cent  in  1892,  after  the  prevalence 
of  higher  rates  in  the  intervening  years.  Low  rates  were 
again  touched  during  the  years  just  preceding  the  dis- 
cussion over  the  renewal  of  the  charter  in  1899,  the  aver- 
age of  1893  having  been  2.83  per  cent;  of  1894,  3  per  cent; 
of  1895,  2.60  per  cent;  of  1896,  2.84  per  cent;  of  1897,  3 
per  cent;  and  of  1898,  3.04  per  cent.'' 

«  Palgrave,  Bank  Rate  and  the  Money  Market,  \>.  210. 
b  Documents  Parlementaires:   1900,  p.  414. 


61 


National     Monetary     Commission 

The  record  of  changes  in  the  discount  rate  during  the 
past  ten  years  is  shown  in  the  table  below.  It  indicates 
that  a  rate  of  great  steadiness  was  maintained  from  1901 
to  1905,  but  that  Belgium,  like  other  countries,  felt  the 
inlluence  of  the  monetary  pressure  which  became  acute 
in  1906.  The  year  1907  opened  with  a  discount  rate  at 
the  National  Bank  of  4  per  cent,  which  was  advanced  on 
March  1 8  to  5  per  cent ;  on  November  2  to  5  K  per  cent ;  and 
within  six  days,  on  November  8,  to  6  per  cent.  Kven 
under  this  pressure  the  censors  were  able  to  affirm  that 
"the  resolutions  of  the  council  of  administration  have 
been  as  moderate  as  possible  and  the  rates  of  discount  in 
Belgium  have  remained  below  those  in  force  in  England 
and  Germany. "°  The  year  1908  witnessed  the  reflex 
influence  of  the  panic.  The  rate  of  discount  was  from  6 
per  cent  progressively  reduced  on  January  14,  to  5  per 
cent;  February  17,  to  4K  per  cent;  March  30,  to  3>^  per 
cent;  and  on  July  13,  to  3  per  cent,  where  it  stood  during 
the  remainder  of  the  year  and  far  into  the  year  1909. 

The  average  rate  of  discount,  as  given  in  the  official 
reports  and  in  the  table  below,  is  based  upon  the  term  for 
which  each  rate  runs,  and  not  necessarily  upon  the  amount 
of  paper  discounted.  The  rate  used  is  a  minimum  rate 
upon  the  ordinary  discounts,  as  in  the  case  of  other 
European  banks  of  issue.  The  table  showing  the  changes 
during  the  last  eleven  years  is  as  follows: 

a  Rapport:   1908,  p.  30. 


62 


National       Bank       of      Belgium 


Changes  in  discount  rate,  i8gg-i<)o8 . 


1899 
1900 
1901 
1902 
1903 
1904 
190S 
1906 
1907 
1908 


Rate. 

Maximum. 

Miaimum. 

Closing. 

Per  cent. 

Per  cent 

Per  cent. 

4 

3 

4 

5 

3i 

S 

S 

4 

4 

4 

3 

3 

3 

3 

3 

4 

3 

3 

3 

3 

3 

4 

3 

4 

4i 

3\ 

4 

6 

4 

6 

6 

' 

3 

Changes. 


Average 
rate. 


Per  cent. 


An  indication  of  the  moderation  of  the  rates  charged  by 
the  National  Bank  is  afforded  by  the  fact  that  between 
1 851  and  1900,  inclusive,  the  rate  of  discount  was  at  3  per 
cent  or  less  during  10,623  days  out  of  the  18,262  days 
which  elapsed.  This  represents  58  per  cent  of  the  time 
involved,  while  rates  equally  low  prevailed  at  the  Bank  of 
England  only  in  55  per  cent  of  the  whole  number  of  days; 
at  the  Bank  of  France  in  49  per  cent;  at  the  Imperial  Bank 
of  Germany  in  1 2  per  cent ;  and  at  the  Bank  of  the  Nether- 
lands in  61  per  cent.  For  the  whole  period  of  18,262  days 
dealt  with  up  to  the  close  of  1900,  the  rate  was  at  3  per 
cent  or  less  for  10,623  days;  from  2,H  to  5  percent  for  6,767 
days;  and  from  53^  up  to  7  per  cent  for  872  days,  or  5  per 
cent  of  the  entire  period. " 

The  relative  stability  of  the  discount  rate  at  the  National 
Bank  of  Belgium  is  attributed  in  the  Senate  report  in  a 
certain  measure  to  the  farsighted  and  wise  management 

<*  Palgrave,  p.  i86. 


63 


N  a  t  i  0  }i  (1 1     Monetary     Commission 


of  the  bank,  whose  administration  has  sought  to  avoid  as 
much  as  possible  injurious  shocks,  but  which  could  not 
escape  the  preponderating  influence  of  the  market  for 
capital  and  the  course  of  business  between  nations.'*  A 
more  critical  attitude,  however,  was  taken  in  1900  by 
Professor  Denis,  the  leader  of  the  Socialist  minority  in 
the  chambers.  He  pointed  out  that,  from  1852  to  1872, 
average  rates  of  discount  at  the  National  Bank  of  Belgium 
ranged  considerably  lower  than  the  official  rates  in  France, 
England,  and  the  Netherlands,  but  that  this  advantage 
disappeared  in  the  period  1 873-1 898,  and  especially  during 
the  latter  portion  of  this  period.  A  summary  of  his 
figures  is  as  follows:  ^ 

Rates  of  discount  at  various  banks. 


Period. 


1852-1872 

1873-1898 
1895-1898 


Bank  of 
France. 


Per  cent. 
4.17 
3-30 
2.07 


Bank  of 
England. 


Per  cent. 
4.09 
3-  19 
2.  61 


Bank  of     |    National 

the  Nether-i    Bank  of 

lands.      j    Belgium. 


Per  cent. 
3.81 
3-  12 
2.88 


Per  cent. 
3-49 
3-31 
2.87 


The  figures  for  the  latter-period.  Professor  Denis  declared, 
represented  a  nearly  complete  revolution  as  compared  with 
the  earlier,  which  he  attributed  in  a  measure  to  the  substi- 
tution of  foreign  bills  for  gold  in  the  reserves.  We  shall 
see,  however,  in  discussing  the  subject  of  the  premium 
on  exchange  and  the  drain  of  coin  from  Belgium,  that 
the  discount  rates  of  recent  years  have  been  subjected  to 
serious  criticism  from  a  very  different  point  of  view  from 
that  of  Professor  Denis,  as  being  too  low,  instead  of  too 


o  Documents  Parlementaires :   1900,  5).  411. 


Olbid.,  p.  283. 


64 


National      Bank       of      Belgium 


high.     The  comparative  rates  for  later  years  have  been  as 
follows:" 

Average  rates  of  discount  since  189S. 


Year. 


1899 
1900 
1901 
1902 
1903 
1904 
1905 
1906 
1907 
1908 


Bank  of 
France. 


Per  cent. 
3  06 

3-  23 
3.  00 
3- 00 
3- 00 
3.  00 
3  00 
3-  00 
3-47 
3   04 


Bank  of 
England. 


Per  cent. 
3-7S 
3 
3 
3 
3 
3 
3 
4 
4 
3 


Bank  of 
Germany. 


Per  cent. 
4.98 
533 
4.  10 
3-32 
3- 84 

4.  23 
3.81 

S-oo 
6.03 
4.76 


Bank  of 
the  Neth- 
erlands. 


Per  cent. 


4.00 
5.10 
3.38 


National 
Bank  of 
Belgium. 


Per  cent, 
3.91 
4.09 
3- 
3- 
3- 
3- 
3- 
3- 
4- 


,38 

.00 

17 


17 
.84 
■95 


3.56 


THE   GRATUITOUS   ISSUE   OF   DRAFTS. 

One  of  the  methods  which  was  early  adopted  by  the 
National  Bank  to  facilitate  the  transfer  of  credit  was  the 
issue  of  drafts  upon  its  branches.  Such  a  draft  is  known 
as  an  accreditif  and  is  in  the  nature  of  an  order  issued 
at  any  given  office  of  the  Bank  upon  another  designated 
office.  Drafts  payable  within  the  city  where  issued  are 
sold  only  in  Brussels.  At  that  point  they  are  payable 
on  the  first  business  day  following  the  date  of  their  issue, 
and  the  same  rule  prevails  as  to  such  drafts  delivered  in 
the  provinces  upon  Brussels.  Those  delivered  in  the 
provinces  upon  an  agency  or  upon  a  branch  were  until 
1908  payable  one  day  later,  but  in  that  year  were  made 
payable  the  day  after  issue.''  In  case  of  the  loss  of  such 
a  draft  a  duplicate  may  be  issued  fifteen  days  after  the 

o  Bulletin  de  Statistiquc,  January,  1909,  LXV,  p    110. 
&  Rapport:   1908,  p.  25. 


85519- 


65 


National     Monetary     Commission 

date  of  its  issue  under  special  authorization  from  the 
governor  of  the  bank. 

These  drafts  were  originally  issued  only  for  sums  not 
less  than  loo  francs  ($19.30),  but  a  motion  was  made 
during  the  discussion  on  the  renewal  of  the  charter  in 
1900  to  reduce  the  denomination  to  20  francs  ($3.86). 
This  motion  was  opposed  by  the  government,  but  the 
promise  was  made,  and  subsequently  fulfilled,  to  reduce 
the  minimum  to  50  francs  ($9.65). 

Prior  to  the  law  of  June  23,  1873,  these  drafts  were 
required  to  be  made  in  favor  of  a  designated  person  and 
could  not  conveniently  be  transferred  by  indorsement  be- 
cause of  the  stamp  tax,  which  assimilated  them  in  such 
cases  to  commercial  paper.  The  law  of  1873  exempted 
them  from  the  stamp  tax  and  broadened  the  scope  of 
their  employment.  It  required  a  demand  for  payment 
within  three  days  of  the  date  of  issue  if  drawn  on  the 
same  place  and  within  six  days  when  drawn  upon  another 
place.  The  holder  who  did  not  demand  payment  within 
the  legal  limit  lost  his  recourse  against  indorsers.  Even 
prior  to  the  law  of  1873,  on  July  i,  1871,  the  bank  abol- 
ished the  charge  of  25  centimes  per  1,000  francs  (5  cents 
per  $193)  and  has  since  furnished  these  drafts  without 
charge  where  they  are  made  payable  at  an  agency.  The 
bank  made  this  concession  in  the  belief  that  it  would  be 
compensated  in  a  measure  by  saving  the  charges  on  the 
transportation  of  bank  notes  by  mail  and  that  the  latter 
would  remain  longer  in  circulation  The  accreditif  is 
paid  only  to  the  person  in  whose  favor  it  is  drawn  or  by 
indorsement,  and  this  indorsement  can  not  be  replaced 
by  a  letter  of  advice.** 

o  Noel,  I.   pp.  530-531. 
66 


National      Bank       of      Belgium 

While  it  is  declared  by  M.  Pierre  des  Essars  that  "the 
Bank  is  thus  called  upon  to  perform  gratuitously  all  trans- 
fers of  money  for  the  whole  country,"''  the  number  of 
such  drafts  dealt  in  has  not  approached  the  volume  of 
redemptions  of  bank  notes.  The  growth  in  their  use 
was  slow  prior  to  the  abolition  of  the  stamp  tax  in  1873, 
but  was  more  rapid  after  that  date.  The  following  table 
gives  for  representative  years  the  tendency  in  this  regard : 

Accriditifs  sold. 


Year. 


Number. 


Amount. 


1863 
1870 
1872 
1873 
187s 
1880 
1885 
1890 
189s 
1900 
190S 
1906 
1907 
1908 


16,988 
63.  179 
92,  300 
129, 991 
199.  113 
249.450 
286, 1 19 
324.346 
413. 73S 
508.034 
S3S. 451 
552.345 
567.  201 


Francs. 

13,  227,354 

54,335. 106 

314.358,816 

498, 100, 000 

562.  107,  138 

705.021,527 

742,403,592 

921,300, 000 

1,022,608,588 

I,  450,  250,  loa 

1.488,588,697 

1.634.527.879 

1,675,832,751 

1,  645,063,  717 


It  was  suggested  by  M.  des  Essars  that  the  facility  given 
by  these  drafts  for  the  transfer  of  money  without  cost 
tends  to  encourage  the  transfer  of  coin  out  of  Belgium. 
How  this  tendency  works  is  thus  set  forth:'' 

"When  a  Belgian  debt  is  due  in  France  the  debtor 
draws  an  order  at  some  agency  payable  at  Tournay  or 
Courtrai  (frontier  places  in  Belgium).  There  coin  is 
asked  for  and  forwarded  to  the  branch  of  the  Bank  of 

"  A  History  of  Banking  in  all  the  Leading  Nations,  III,  p.  276 
&  Ibid.,  p.  277. 


67 


N  a  t  i  0  }i  a  I     Monetary     Commission 

France  at  Roubaix  or  Tourcoing.  The  transfer  charge 
is  very  light,  so  that  money  leaves  Belgium  when  the 
exchange  is  but  2  per  1,000,  under  the  circumstances 
explained.  The  rate  would  have  to  reach  4  to  5  per  1,000 
to  make  it  a  matter  of  advantage  to  transfer  actual  coin 
instead  of  using  orders.  Belgium  is  thus  more  exposed 
than  any  other  country  to  a  drainage  of  coin." 

This  subject  of  the  exchange  between  Belgium  and 
other  countries  is  an  intricate  one,  however,  into  which 
many  other  factors  enter  than  the  movement  of  drafts, 
and  is  discussed  elsewhere  in  this  report. 

MOVEMENTS   OF  THE   CIRCULATION. 

The  circulation  of  the  National  Bank  of  Belgium  has 
proved  ver}'  flexible,  in  spite  of  the  absence  of  any  special 
restrictions  upon  note  issues.  The  net  circulation  of  cur- 
rency has  tended  to  expand  in  Belgium,  as  in  other  coim- 
tries,  by  reason  of  the  expansion  of  business  and  by  reason 
of  the  rise  in  prices,  demanding  a  larger  volume  of  the 
medium  of  exchange.  There  has  been  a  tendency  also 
toward  the  substitution  of  notes  for  coin  in  the  hands  of 
the  public,  because  notes  are  less  cumbersome  and  more 
convenient  than  the  heavy  silver  coins.  The  issue  of 
notes  of  the  denomination  of  20  francs  ($3.86)  has  natu- 
rally tended  to  substitute  paper  for  coin  down  to  that 
denomination. 

The  progression  in  the  total  circulation  has  been  much 
more  rapid  than  in  the  population.  The  latter  increased 
from  4,827,833  souls  in  1866  to  6,693,548  in  1900,  and  in 
1907  was  estimated  at  about  7,200,000.  On  the  part  of 
the  circulation,  from  1870,  when  the  average  was 
187,392,000  francs  ($36,173,000),  there  was  an  increase  in 

68 


National      Bank       of      Belgium 

1873  to  332,480,410  francs  ($64,170,000).  The  increase 
was  less  rapid  from  this  date  to  1888,  when  the  average 
was  361,030,000  francs.  The  period  of  commercial  ex- 
pansion which  followed  led  to  the  movement  of  the  aver- 
age upward  in  1900  to  576,485,510  francs,  and  there  was  a 
further  advance  during  the  next  eight  years  which  carried 
the  average  for  1908  to  753,079,970  francs  ($145,350,000). 

The  degree  of  elasticity  in  the  circulation  is  indicated 
partly  by  the  variations  at  different  periods  of  the  year 
and  partly  by  the  amount  of  notes  canceled  and  retired 
during  the  year.  The  range  of  variation  is  'not  so  great 
as  in  some  other  coimtries,  because  of  the  essentially 
manufacturing  character  of  the  industries  of  Belgium 
and  the  comparatively  minor  part  played,  therefore,  by 
agricultural  operations.  The  difference  between  the  cir- 
culation on  December  31,  however,  when  it  is  near  its 
maximum,  and  the  average  for  the  year  is  in  itself  con- 
siderable, without  taking  account  of  the  wider  variations 
indicated  by  the  difference  between  the  minimum  and 
the  maximum  points  of  the  year.  Thus,  in  1908,  notes  in 
circulation  on  December  31  were  806,878,060  francs, 
while  the  average  for  the  year  was  753,079,970  francs. 
The  difference  in  1906  was  greater,  the  circulation  at  the 
close  of  the  year  having  been  770,423,340  francs  and  the 
average  for  the  year  702,363,760  francs. 

Comparison  of  the  minimum  and  maximum  circulation 
for  different  years  shows  variations  usually  ranging  about 
10  per  cent.  The  period  of  maximum  circulation  is  al- 
most invariably  at  the  turn  of  the  year,  sometimes  occur- 
ring late  in  December  and  sometimes  continuing  into  the 
first  weeks  of  January  before  the  reflex  movement  is  felt. 
There  is  a  general  tendency  downward  from  January  to 

69 


National    Monetary     Commission 

midsummer,  which  is  halted  from  time  to  time  by  the 
demand  for  currency  at  the  end  of  each  quarter  and  on 
other  special  occasions.  The  latter  part  of  March  and  the 
early  days  of  April  mark  the  logical  period  of  minimum 
circulation,  but  the  state  of  comparative  equilibrium, 
which  extends  from  these  dates  to  midsummer,  is  occa- 
sionally marked  by  a  decline  slightly  below  the  average 
of  the  spring.  The  table  which  appears  below,  showing 
the  variations  between  maximum  and  minimum  circula- 
tion during  the  past  ten  years,  illustrates  the  character 
of  these  movements.  The  figures  presented  are  for  com- 
plete weeks,  ending  in  some  cases  a  few  days  before  De- 
cember 31,  which  explains  the  apparent  discrepancy  in 
one  or  two  cases  with  the  later  table,  where  the  circula- 
tion of  December  31  reached  above  the  maximum  shown 
for  the  official  banking  year.  In  some  cases  the  demand 
for  circulation  has  risen  higher  during  the  autumn  than 
at  the  close  of  the  year,  but  upon  the  whole,  as  the  table 
indicates,  the  maximum  is  attained  near  the  end  of  the 
year  and  the  minimum  during  the  spring  and  summer. 

Variations  in  the  circulation. 


Year. 

Maximum. 

Minimum. 

Average. 

Date, 

Amount. 

Date. 

Amount. 

Amount. 

1899 

1900 

1901 

1902 

1903 

1904 - 

1905 

1906 

1907 

1908 

Nov.    30 
Oct.      31 
Jan.      31 
Dec.     30 
Jan.      IS 
Dec.      29 
Nov.       2 
Oct.      3 1 
Oct.      2 1 
Dec.     30 

Francs. 
568, 500, 000 
597. 900, 000 
623, 500, 000 
672,  600,  000 
650, 500, 000 
668, 700, 000 
693, 300, 000 
736, 500, 000 
770, 600, 000 
800,  200,  000 

Mar.       9 
June     21 
Sept.       s 
June     19 
June     18 
June     23 
Mar.     23 
Apr.      19 
Apr.       4 
June     18 

Francs. 
511, 700, 000 
553,800,000 
567, 200, 000 
596,  300,  000 
60s, 000. 000 
615, TOO, 000 
643, 700, 000 
670,  900,  000 
706, 600, 000 
711, 700, 000 

Francs, 
538,076.400 
576,433.510 
599.  265,950 
621, 568, 640 
636,  760,  360 
645. 989. 100 
676,  841,  990 
702,363, 760 
743.404.  700 
753.079.970 

70 


National      Bank      of      Belgium 

The  denominations  of  the  notes  issued  by  the  National 
Bank  were  fixed  in  the  beginning  and  have  not  since 
been  altered.  They  are  five  in  number — for  20  francs, 
50  francs,  100  francs,  500  francs,  and  i  ,000  francs.  Neither 
the  law  nor  the  regulations  of  the  Government  specify  the 
proportion  of  any  one  denomination  to  be  issued  or  kept 
in  circulation.  Figures  of  the  different  denominations  are 
available  only  from  1870,  when  the  total  circulation  of 
notes  was  187,392,000  francs.  The  changes  from  year  to 
year  after  the  use  of  the  different  denominations  was  fairly 
established,  about  1877,  show  the  largest  increase  in  notes 
for  20  francs  ($3.86)  and  notes  for  100  francs  ($19.30). 
The  demand  for  notes  of  1,000  francs,  while  varying 
somewhat  from  year  to  year,  has  upon  the  whole  shown 
no  great  increase,  even  with  growth  in  the  volume  of 
business.  The  following  table  shows  the  average  value 
for  each  denomination  outstanding  for  representative 
years: 

Average  of  note  issues  by  denomination. 
[In  thousands  of  francs.] 


Year. 


1870 
1873 
187s 
1880 
188s 
1890 
1895 
1900 
1905 
1906 
1907 
1908 


1,000  francs.   500  francs 


80.367 
150,030 
123.034 
128, 28s 
114.887 
121.  788 
123. 749 
168.  446 
184.871 
196, 167 
197.987 
160, 267 


18,  501 
23.523 
18,486 
23. 254 
16,822 
21 , 906 
25,898 
32,599 
37.398 
40,951 
40,845 
72,  146 


100  francs. 


65. 
1 20, 
137. 
124, 
160, 
i7r, 
201, 
240, 
275. 
260, 
289, 
297. 


782.  o 
766.9 
438.7 
271.2 
109-9 
487.3 
301.8 
253-6 
903-9 
826.  7 
324-3 
698.0 


SO  francs. 


7,  298.  o 
3. 189. 7 
r,  498.  I 
22,953.  I 
27.438.6 
29.337-  3 
34.384.  7 
47,649.3 
61,  242.  3 
71. 359-9 
71,  621.  7 
73.608.6 


20  francs. 


15.444-0 

34.970-  3 

43. 109-4 

14, 860. 7 

27,  120.  8 

37.  791.  2 

52,079.  I 

87.535-1 

117,426.3 

133.058.6 

143.626. 7 

149.360.  J 


Notes  retired  during  the  year  have  varied  in  amount 
according  to  business   conditions.     The  maximum   pro- 


7» 


National    Monetary     Commission 


portion  of  such  retirements  was  in  1886,  when  they 
amounted  to  306,790,000  francs  in  an  average  circulation 
of  355,893,600  francs,  or  about  85  per  cent.  The  aver- 
age cancellations,  however,  are  much  below  this  amount, 
having  been  in  1907  366,120,500  francs,  or  49  per  cent 
of  the  average  circulation.  The  cancellations  of  1908 
were  508,491,400  francs,  or  67  per  cent  of  the  average 
circulation. 

One  of  the  most  striking  features  of  the  circulation  dur- 
ing recent  years  has  been  the  increase  in  the  proportion 
of  notes  for  20  francs.  Such  notes  formed  in  1873  but 
little  more  than  10  per  cent  of  the  average  circulation. 
The  amount  had  not  increased  materially  up  to  the  year 
1893,  when  the  proportion  to  the  total  circulation  had 
declined  to  about  9  per  cent.  From  that  date,  however, 
the  increase  was  rapid  and  resulted  in  doubling  the  amount 
of  these  small  notes  within  less  than  six  years  and  again 
nearly  doubling  the  amount  in  the  eight  years  ending 
with  1907.  A  view  of  the  movement  of  circulation,  the 
proportion  of  notes  of  20  francs,  and  the  notes  retired 
for  representative  years  is  afforded  by  the  following  table : 

Movement  of  tlie  circulation. 


Year. 

Circulation 
Dec.  31. 

Average  circu- 
lation during 
year. 

Average  notes 
of  20  francs. 

Notes  retired 
during  year. 

1873 

1880  -       .       .     . 

Francs. 
320,586,070 
339.969.510 
367,423,810 
404,  721,  600 
476, 502, 020 
63 1 , 63 1 , 800 
724, 082, 140 
770,423.340 
798. 167, 760 
806,878,060 

Francs. 
332,480,410 
313,624,520 
346,378,860 
382, 309, 680 
450,413,  100 
576,483,510 
676,841,990 
702,363, 760 
743,404. 700 
753.079.970 

Francs. 

34,  970,  260 

14, 860, 720 

27,  120,  860 

37.791.  180 

52,079,  100 

87.535.  160 

117.426,340 

133.058.  660 

143, 626, 700 

149.  360,  320 

Francs 
109.659.  7SO 
205, 700, 000 
301,  250,  000 
221,  540,  coo 
145, 320, 000 
330,320,000 
405, 500, 000 
643,  250, 000 
366,  120,  500 
508,491.400 

1885.   

1895   .   . 

190S- 

1907  _ 

1908 

72 


National      Bank      of      Belgium 

REGUI.ATION   OF   THE   NOTE   CIRCUI.AT10N. 

The  circumstances  under  which  the  National  Bank  of 
Belgium  was  created  gave  a  distinctive  character  to  the 
provisions  regarding  the  security  for  the  issue  of  notes. 
The  original  charter  of  1850  contained  these  provisions  in 
regard  to  the  notes  themselves: 

"Article  XII. 

"The  bank  may  issue  notes  payable  to  bearer.  The 
amount  in  circulation  shall  be  represented  by  securities 
which  can  be  easily  converted  into  cash. 

"  The  proportion  between  the  cash  reserve  and  the  notes 
in  circulation  shall  be  fixed  by  the  statutes. 

"Article  XIII. 

"The  Government,  by  agreement  with  the  Bank,  shall 
determine  the  form  of  the  notes,  the  method  of  their 
issue,  and  the  amount  of  each  denomination." 

No  changes  were  made  in  these  provisions  by  subsequent 
amendments  of  the  charter,  except  that  in  1900  the  notes 
were  required  in  future  to  be  printed  in  both  the  lan- 
guages of  the  country  (French  and  Flemish) ,  and  provision 
was  made  for  paying  into  the  public  Treasury  the  amount 
of  old  issues  of  notes  prior  to  1869  which  had  not  been 
presented  for  redemption. 

The  original  charter  of  the  Bank  made  the  redemption 
of  notes  obligatory  only  at  the  head  office  at  Brussels; 
but  in  18.72  this  obligation  was  extended  to  the  agencies, 
with  the  proviso  that  payment  might  be  deferred  until 
there  had  been  time  to  receive  the  necessary  funds  from 
the   head  office.     The   notes  were   made   receivable  for 

73 


National    Monetary     Commission 

public  dues  from  the  beginning,  but  it  was  not  until  1873 
that  they  were  declared  legal  tender  between  individuals 
so  long  as  they  continued  to  be  redeemed  in  legal  coin. 
This  privilege  was  accorded  by  a  special  law  of  June  20, 
1873,  which  also  provided,  however,  that  the  legal-tender 
quality  should  cease  whenever  the  Government  should 
cease  to  receive  the  notes  at  public  offices.** 

The  Belgian  law  imposes  no  limit  upon  the  amoimt  of 
notes  which  may  be  issued  by  the  National  Bank.  It  was 
declared  by  M.  Malou  in  1872  that  "the  credit  circulation 
is  not  extended  or  restricted  arbitrarily  at  the  will  of 
institutions  of  credit;  its  necessary  limits  are  the  require- 
ments for  transactions  and  the  movement  of  business."^ 

The  law  required  that  there  should  be  a  relationship 
established  between  the  metalUc  stock  and  the  circulation, 
but  left  to  the  statutes  of  the  Bank,  as  determined  upon 
by  the  Government,  the  decision  of  what  this  relationship 
should  be.  The  proportion  is  fixed  by  Article  XXXIV  of 
the  present  statutes  at  one-third  of  the  amotuit  of  notes 
and  other  obligations  payable  at  sight,  but  it  is  provided 
that  the  cash  reserve  may  be  allowed  to  go  below  this 
minimum  under  circumstances  and  Hmits  to  be  authorized 
by  the  Minister  of  Finance.  It  was  declared  when  the 
law  was  framed  in  1850  that  the  exact  proportion  of  the 
reserve  held  against  notes  could  not  be  determined 
according  to  any  fixed  rule,  but  must  depend  upon  time 
circumstances,  and  perhaps  also  the  state  of  public  feeling. 
For  this  reason  the  matter  was  left  to  the  Government  and 
the  Bank.  Experience,  it  was  declared  in  the  report  of 
M.  Delbeke  in  1899,  had  proved  the  wisdom  of  this  solu- 

«  Documents  Parlementaires :  1900,  p.  480. 
iilbid.,  p.  471. 

74 


National       Bank       of      Belgium 

tion.  It  was  more  and  more  agreed  by  modern  experience 
that  any  such  limit  should  be  conceived  in  such  a  manner 
as  to  leave  the  bank  with  hands  sufficiently  free  to  meet 
successfully  a  period  of  crisis.  Upon  this  question  of  a 
fixed  proportion  of  reserve  the  report  of  M.  Delbeke 
quoted  from  an  article  by  Professor  Helfferich  in  the 
"Revue  Politique  et  Parlementaire "  of  January  lo,  1899, 
the  following:'* 

"Requirements  of  this  sort  should  not  establish  a  rule 
for  the  government  of  the  Bank  in  periods  of  calm.  If 
the  government  of  the  Bank  does  not  do  in  normal  times 
considerably  more  than  is  required  by  the  provisions  of 
the  law,  it  will  not  be  able  in  difficult  times,  when  the 
tiller  escapes  from  its  hands,  to  keep  within  the  limits  of 
legal  requirements,  and  even  for  a  competent  management 
there  is  danger  of  being  compelled  to  exceed  the  legal 
limits  because  of  a  violent  and  sudden  crisis.  It  is  at  such 
moments  that  a  central  bank  becomes  indispensable  to 
safeguard  the  economic  interests  of  the  country  and  that 
it  becomes  obligatory  to  suspend  the  banking  law. 

"Of  this  the  suspension,  authorized  on  three  occasions, 
of  the  restrictive  clause  contained  in  the  English  bank 
act  affords  a  classic  example.  But  suspensions  of  this 
sort,  imposed  by  necessity,  never  take  place  without  pro- 
voking in  a  certain  measure  a  movement  having  the  char- 
acter of  a  panic.  If  a  bank  approaches  the  limit  at  which 
it  ought  to  suspend  its  issue  of  bills,  the  fact  produces,  as 
has  been  seen  in  England,  a  run  upon  the  Bank — not  to 
obtain  the  redemption  of  bills,  but  to  obtain  the  discount 
of  paper — for  everyone  fears  the  arrival  of  the  moment 

a  Documents  Parlementaires:  i<)00,  p.  151. 
75 


National     Monetary     Commission 

when  the  Bank  will  no  longer  be  able  to  issue  bills  nor  in 
consequence  to  grant  discounts.  The  imposition  by  law 
of  a  maximum  figure  for  the  issue  of  bills  not  covered  by 
the  metallic  reserve,  and  of  a  minimum  of  metallic  re- 
ser\'e  for  covering  the  bills,  represents  then  a  limit  imposed 
upon  the  elasticity  of  the  Bank  and  a  limit  which,  instead 
of  preventing  a  crisis,  is  rather  of  a  nature  to  provoke  and 
aggravate  it," 

The  regulations  imposed  at  the  National  Bank  of  Bel- 
gium to  secure  the  safety  of  the  notes  and  to  prevent 
thefts  and  fraudulent  overissues  are  similar  to  those  in 
other  large  banks.  The  special  paper  required  for  the 
notes  is  carefully  recorded  and  is  guarded  in  a  safe  with 
two  keys.  The  comptroller  delivers  to  the  chief  of  the 
printing  office  the  paper  necessary  for  the  time  being, 
where  also  it  is  kept  under  double  keys.  After  printing, 
the  notes  which  have  been  spoiled  as  well  as  those  prop- 
erly printed  are  remitted  to  the  comptroller  of  notes. 
Those  spoiled  are  marked  before  delivery  with  the  word 
"faute"  (spoiled)  and  are  perforated.  These  spoiled 
notes  are  carefully  verified  and  destroyed  at  the  end  of 
every  six  months. 

The  comptroller  of  notes  is  charged  with  numbering  and 
affixing  the  seal  upon  the  notes.  Every  issue  under  a 
given  letter  of  the  alphabet  is  inscribed  in  a  register  con- 
taining the  following  information: 

The  number  in  the  order  of  the  alphabet. 

The  date  of  manufacture. 

The  date  of  issue. 

The  names  of  the  signers. 

The  letter  of  the  series. 


76 


National      Bank       of      Belgium 

The  number  in  this  series. 
The  date  of  destruction. 

Verifications  are  made  in  the  case  of  the  special  paper 
every  six  months,  or  oftener  if  judged  necessary  by  the 
administration  of  the  Bank.  The  verification  is  made  by 
the  governor  or  a  director  delegated  by  the  council,  with 
the  assistance  of  the  director  charged  with  the  supervision 
of  the  note  service.  Notes  at  the  printing  office  and  at 
the  sealing  office  are  verified  at  least  once  a  month  by  the 
director  of  the  note  service,  assisted  by  the  comptroller. 
The  notes  to  be  issued  are  verified  at  least  once  every  six 
months  by  the  director  of  the  service  and  the  treasurer. 
A  report  is  made  at  the  end  of  each  month,  showing  the 
status  of  the  special  paper,  notes  in  course  of  printing,  and 
those  actually  printed. 

Notes  which  have  become  unsuitable  for  circulation  are 
withdrawn  by  the  central  reserve  agency.  They  are 
punched  with  the  word  "annule"  (cancelled),  with  the 
date  of  their  retirement.  These  notes  are  also  remitted 
to  the  office  of  note  issue,  which  records  the  number,  veri- 
fies them,  classifies  them,  and  proceeds  to  their  cancel- 
lation in  the  records  already  described.  When  the  council 
orders  the  destruction  of  canceled  notes,  the  operation  is 
effected  under  the  supervision  of  two  directors  designated 
by  it,  in  the  presence  of  three  delegates  of  the  grade  of  at 
least  chief  of  bureau.  The  council  determines  at  the 
same  time  the  method  of  destruction.'* 

One  of  the  new  provisions  of  the  law  of  1900  directed 
the  bank  to  pay  into  the  public  treasury  within  one  month 
the  face  value  of  notes  belonging  to  issues  prior  to  the  year 

oLois  Organiques:  Statuts,  1907,  pp.  95-100 

77 


National     Monetary     Commission 

1869  which  were  still  outstanding.  It  was  also  provided 
that  whenever  a  given  type  of  note  was  replaced  or  sup- 
pressed, the  bank  should  make  a  similar  payment  into 
the  treasury  at  the  expiration  of  a  date  to  be  fixed  in  each 
case  by  agreement,  and  that  this  provision  should  be  im- 
mediately applicable  to  notes  for  20  francs  of  types 
previous  to  that  authorized  in  1897.  The  amount  of 
these  old  notes  was  to  be  deducted  from  the  reported 
amount  of  the  circulation,  and  when  any  of  them  were 
redeemed  the  amount  thus  disbursed  was  to  be  charged 
to  the  account  of  the  treasury. 

The  report  of  the  Minister  of  Finance  upon  this  subject 
is  interesting,  because  it  presents  figures  of  the  amount  of 
old  notes  of  issues  prior  to  1869,  which  were  outstanding 
on  December  3 1 ,  1897.'*  These  issues  dated  back  as  far 
as  1 85 1  and  included  notes  issued  in  185 1,  1852,  1853, 
1856,  1862,  1863,  and  1865.  In  every  case,  except  the 
original  issues  of  1851,  the  notes  still  outstanding  were  of 
only  one  denomination.  The  total  face  value  of  all  such 
issues  was  only  1,025,500  francs  ($198,000)  and,  curiously 
enough,  was  made  up  in  part  of  353  notes  for  1,000  francs 
(353,000  francs)  of  the  issue  of  1853,  which  would  appear 
to  represent  the  loss  of  a  considerable  amount  in  these 
notes  at  one  time.  The  loss  of  such  large  notes  may  be 
considered  more  exceptional  than  that  of  notes  of  20 
francs,  of  which  8,259  notes,  representing  a  value  of 
165,180  francs  ($32,000)  of  the  issue  of  1851,  were  still 
outstanding.  If  this  amount  is  divided  by  the  period  of 
forty-seven  years  which  elapsed  between  1851  and  the 
close  of  1897,  the  average  annual  loss  on  the  issue  would 

o  Documents  Parlementaires:   1900,  p.  23. 
78 


National      Bank       of      B  e  I  g  i  u 


m 


stand  at  about  3,500  francs  ($700)  per  year,  and  would 
indicate  how  small  is  the  ultimate  loss  even  on  notes  of 
small  denominations. 

FOREIGN   BII.I.S   IN   THE   RESERVE. 

The  National  Bank  of  Belgium  was  allowed,  from  an 
early  date,  to  count  as  part  of  its  reserve  first-class  for- 
eign bills  which  were  guaranteed  by  banking  houses  in 
Belgium.  The  proportion  of  the  reserve  made  up  of  such 
bills  tended  to  increase  until  they  came  to  constitute, 
just  before  the  renewal  of  the  charter  in  1900,  about  25 
per  cent  of  the  total  computed  reserve.  This  fact  was 
made  a  subject  of  some  criticism  by  Professor  Denis  in 
his  report  in  favor  of  a  special  inquiry  into  the  manage- 
ment of  the  Bank.  He  declared  that  the  foreign  port- 
folio, at  first  rare  and  variable,  had  become  constant  and 
increasing;  that  from  6  per  cent  of  the  total  discounts 
from  1872  to  1876,  it  had  increased  to  25  per  cent  from 
1893  to  1897.  In  concluding  his  discussion  of  this  sub- 
ject, he  declared : " 

"The  fluid  equilibrium  of  our  reserve  seems  to  be  a 
problem  more  and  more  complex,  in  which  the  anticipa- 
tion of  the  extent  of  the  ultimate  demand  fcrr  specie  and 
the  certainty  of  realizing  the  securities  held  are  bound  up 
with  the  aggregate  of  the  conditions  of  the  international 
market,  with  the  distribution  of  the  paper  between  dif- 
ferent places,  with  causes  which  may  affect  foreign  cash 
reserves,  and  even  with  the  question  of  the  standards. 
Does  this  constitute  a  financial  system  without  peril? 
On  the  other  hand,  what  are  the  measures  which  would 

o  Documents  Parlementaires:  igoo,  p.  66. 
79 


National    Monetary     Commission 

permit  escape  from  this  instability,  from  this  interna- 
tional lack  of  unity?  " 

In  meeting  this  criticism  M.  Delbeke  examined  the  sub- 
ject from  the  three  points  of  view,  whether  the  holding 
of  foreign  bills  was  equivalent  in  fact  to  a  metallic  reserve ; 
if  they  could  constitute  a  danger  to  the  Bank;  and  if 
there  was  occasion  to  exclude  them  from  the  calculation 
of  the  proportion  between  the  reserve  and  the  circulation 
of  notes.  M.  Delbeke  declared  that  the  facts  submitted 
by  the  Government  established  the  genuine  benefits,  not 
to  say  the  absolute  necessity,  of  the  practice  which  the 
Bank  had  long  pursued  on  the  subject  of  these  foreign 
bills.  He  emphasized  the  solidity  of  the  limited  number 
of  firms  whose  signatures  were  accepted,  such  firms  being 
limited  to  indorsing  over  to  the  Bank  the  paper  of  third 
parties.  He  then  quoted  from  the  agreement  between 
these  firms  and  the  Bank,  to  the  effect  that  the  firms 
bound  themselves  to  rediscount  at  any  time  paper  clothed 
with  their  indorsement,  at  a  rate  which  should  not  be 
higher  than  the  official  rate  of  the  central  bank  of  the 
country  from  which  the  paper  emanated,  and  should  pro- 
tect the  National  Bank,  according  to  its  instructions, 
either  in  bills  of  exchange  at  market  quotations  or  in  gold 
coin  or  bullion,  except  in  case  of  superior  force.  The 
National  Bank  engaged  itself  not  to  abuse  this  option  of 
rediscount  and  not  to  demand  securities  for  a  sum  exceed- 
ing 6,000,000  to  8,000,000  francs  per  week. 

The  utility  of  the  holdings  of  foreign  bills  in  emergency 
has  been  several  times  demonstrated  in  a  striking  man- 
ner. At  the  outbreak  of  the  crisis  which  followed  the 
declaration  of  war  between  France  and  Germany,   the 


80 


National      Bank       of      Belgium 

National  Bank  had  on  July  2 1  foreign  paper  to  the  amount 
of  64,144,255  francs  ($12,370,000).  This  paper  was  em- 
ployed so  generously  to  obtain  gold  that  the  amount  on 
hand  was  reduced  by  the  end  of  July  to  7,227,300  francs 
and  on  August  20  to  3,531,900  francs.  The  product  of 
the  sale  or  payment  of  the  bills  had  been  converted  into 
bars  of  gold  and  silver. 

On  another  occasion,  at  the  time  when  the  subject  of 
the  renewal  of  the  charter  was  pending  in  November,  1898, 
the  National  Bank  was  able  to  maintain  a  discount  rate 
of  3  per  cent,  when  the  official  rate  stood  in  Berlin  at  6 
per  cent,  in  Vienna  at  5  per  cent,  and  in  London  at  4  per 
cent.  The  position  of  the  Bank  of  Belgium  was  main- 
tained by  realizing  a  part  of  its  holdings  of  foreign  paper, 
which  reduced  the  amount  from  122,800,000  francs  to 
98,400,000  francs.  The  position  taken  by  the  supporters 
of  the  Bank  in  this  matter  is  taken  also  by  Mr.  Inglis 
Palgrave  in  the  following  language :  " 

"The  Bank  has  been  enabled  to  carry  on  its  operations 
with  this  comparatively  small  bullion  reserve  through  its 
skill  in  discounting,  and  through  the  power  of  regulating 
the  foreign  exchanges  which  it  possesses  by  means  of  the 
quantity  of  foreign  paper  which  it  holds.  In  the  balance 
sheet  of  December  31,  1901  (p.  207),  the  bills  discounted 
stood  at  £19,100,000;  of  this  sum  the  foreign  bills  held 
amounted  to  £6,500,000.  Through  holding  these  drafts 
on  other  countries  the  council  of  the  Bank  has  the  means 
of  operating  in  any  direction  when  the  exchanges  are 
unfavorable  to  Belgium.     The  moderate  rates  of  discount 

0  Bank  Rate  and  the  Money  Market,  p.  184.  I 

85519—10 6  81 


National    Monetary     Commission 


charged  and  the  comparatively  small  range  of  fluctuation 
show  how  carefully,  especially  of  late  years,  the  Bank  of 
Belgium  has  maintained  this  power.  Roughly  speaking, 
one-fifth  part  of  the  bills  it  has  dealt  with  during  the  last 
twenty  years  have  been  on  foreign  countries.  " 

Mr.  Palgrave  presents  the  following  comparison  for 
representative  years  of  the  relation  of  foreign  bills  to  total 
operations  in  discount: 

Domestic  and  foreign  discounts. 


Year. 


1851 

i860 
1870 
1880 
1890 
1900 
1901 


On  Belgium. 


Francs. 

81 , 200, 000 

729, 400, 000 

I,  205. 000, 000 

I, 647, 000, 000 

1,  958,  600,  000 
2. 749. 700, 000 

2,  551,  42s,  000 


On  foreign 
countries. 


Francs. 
104, 800, 000 
28, 000, 000 
131 , 800, 000 
347, 600, 000 
396, 900, 000 
693, 200, 000 
819,  400, 000 


Total. 


Francs. 
186, 000, 000 
7S7,  400,  000 
I,  336,  800,  000 
I.  994.  600,  000 
2.355.  500,000 
3, 442, 900, 000 
3,370,825,000 


Referring  to  the  experience  of  various  critical  occasions, 
the  report  to  the  Senate  by  the  Chevalier  Descamps 
declared  that  a  skillful  division  of  foreign  bill  holdings 
between  a  certain  number  of  countries  wisely  chosen  was 
of  a  nature  to  provide  against  circumstances  which  might 
offset  in  a  manner  the  realization  of  such  holdings  or 
paralyze  its  effects.  Summing  up  the  benefits  of  the  system, 
M.  Descamps  said:  ^ 

"The  moderate  and  skillful  use  of  the  foreign  bill  hold- 
ings as  a  sort  of  supplement  to  the  metallic  stock  does  not 
seem  to  be  compromising,  and  from  a  multiplicity  of  view- 
points is  even  an  advantage.     It  may  tend  to  give  to  the 

«  Documents  Parlementaires:  1900,  p.  475. 
82 


National       Bank       of      Belgium 

reserve  an  elasticity  superior  to  mere  rigidity  of  proportions, 
which  is  neither  scientifically  justified  nor  practically  pro- 
tective in  an  absolute  manner.  But  naturally  the  ques- 
tion involved  here  is  to  guard  against  being  drawn  too  far, 
which  might  produce  a  famine  of  money.  It  must  always 
be  recalled  that  a  general  equivalence  is  not  an  absolute 
identity,  and  that  in  the  long  run,  to  use  an  old  compari- 
son, it  is  always  preferable  to  keep  one's  self  in  a  large 
measure  on  the  firm  ground  of  gold  and  silver  rather  than 
to  fly  upon  the  wings  of  foreign  paper.  " 

One  of  the  points  raised  against  a  reserve  kept  in  foreign 
bills  was  the  possible  suspension  of  the  metallic  standard 
in  case  of  war  by  one  of  the  countries  on  which  such  paper 
might  be  drawn.  It  was  declared  by  M.  Delbeke,  however, 
in  his  report  to  the  Chambers,  that  there  was  no  reason  for 
such  apprehensions,  in  view  of  the  precautions  which  were 
taken  by  the  Bank  in  regard  to  its  foreign  debtors  and  which 
found  expression  in  the  clause  which  has  been  already 
quoted,  compelling  the  indorser  to  rediscount  or  cover 
the  paper  on  the  first  demand.  In  fact,  it  was  added,  the 
paper  in  circulation  at  any  given  time  was  based  upon  the 
monetary  standard  of  that  time  and  could  not  be  affected 
by  measures  which  might  be  taken  at  a  later  date  in  the 
debtor  country. ** 

The  practical  operation  of  the  reserve  of  foreign  bills 
was  discussed  by  the  Government  in  replying  to  a  series 
of  questions  submitted  by  the  central  committee  of  the 
lower  house,  pending  the  revision  of  the  charter  in  1900. 
The  questions  asked  on  this  head  were  as  to  the  paper 
of  this  sort  which  was  actually  included  in  the  assets  of 

o  Documents  Parlementaires:  1900,  p.  149 
83 


National     Monetary     Commission 

the  bank,  as  to  the  average  rate  of  return  and  as  to  the 
average  maturity.  The  reply  to  these  questions  was  as 
follows : " 

"The  drafts  which  are  included  in  the  foreign  port- 
folio are  securities  of  the  first  order,  protected,  moreover, 
by  the  indorsement  of  banking  houses  chosen  among  the 
most  important  of  Paris,  London,  Berlin,  Amsterdam, 
Hamburg,  Cologne,  Frankfort,  and  Vienna. 

"At  no  time  has  the  bank  suffered  the  slightest  loss 
upon  these  securities.  The  average  rate  of  operations  in 
foreign  bills  was  during  the  year  1898,  2.79  per  cent,  with 
an  average  maturity  of  forty -nine  days;  in  1897,  2.53  per 
cent,  with  an  average  maturity  of  forty-seven  days;  in 
1906,  2.51  per  cent,  with  an  average  maturity  of  forty- 
eight  days. 

"It  is  important  to  note  that  the  rates  earned  by  oper- 
ations with  the  foreign  portfolio  are  not  collected  in  a  per- 
manent manner.  Thus,  in  the  course  of  the  year  1898  the 
Bank  on  different  occasions  suspended  the  credits  extended 
to  foreign  correspondents,  with  the  object  of  having  in  its 
own  hands  for  the  moment  coin  to  replenish  its  reserve, 
which  was  vigorously  attacked  during  the  period  when 
discount  had  mounted  to  6  per  cent  at  Berlin  and  to  4 
per  cent  in  London  and  when  exchange  on  Paris  had  risen 
to  3>^  in  the  1,000  (0.35  per  cent). 

"  During  several  weeks  correspondents  at  Paris  with 
whom  the  bank  had  conducted  transfer  operations  upon 
London,  BerUn,  and  Hamburg  made  shipments  of  specie. 
The  Bank  thus  received  38,000,000  francs  in  5-franc  pieces. 
This  combination   of  measures   permitted  the  Bank  to 

o  Documents  Parlementaires :   1900,  p.  187. 


National      Bank       of      Belgium 

maintain  during  almost  the  entire  year  rates  of  discount 
which  were  very  moderate  and  to  avoid  the  necessity  of 
raising  them,  except  during  a  very  short  period." 

THE   QUESTION   OF   MONOPOI^Y   OF   NOTE   ISSUE. 

The  question  whether  the  National  Bank  possesses  a 
monopoly  of  the  power  of  issuing  notes  is  to  a  large 
extent  an  academic  one.  It  is  admitted  on  all  sides  that 
monopoly  practically  exists,  but  there  is  sufficient  vague- 
ness in  the  law  to  leave  open  the  possibility  of  competi- 
tion, if  approved  by  the  chambers.  It  was  frankly 
declared  in  the  report  in  favor  of  the  government  measure 
submitted  to  the  Chamber  of  Deputies  on  March  i6, 
1872,  by  M.  Pirmez,  that  "in  fact  we  have  in  Belgium 
the  system  of  a  single  bank  of  issue."  "In  law,  how- 
ever," he  went  on  to  declare,  "the  liberty  of  creating 
banks  of  issue  exists  for  individuals,  for  societies  with  a 
collective  name,  and  for  societies  with  silent  partners  (en 
commandite  simple) ;  it  does  not  exist  for  joint-stock 
companies  and  stock  companies  with  silent  partners. "** 

Whether  a  company  organized  by  shares  had  rights 
under  the  general  law  to  issue  notes  was  briefly  discussed, 
but  it  was  pointed  out  that  a  regular  corporation  with 
limited  liability  could  be  created  only  by  law,  and  that, 
in  consequence,  the  right  of  creating  banks  of  issue  could 
be  refused  without  infringing  any  existing  rights.     The 


o  Documents  Officiels:  1872,  p.  47.  It  is  hardly  necessary  to  go  here 
into  the  different  forms  of  j)artnership  and  corporate  liability  recognized 
by  the  law  of  Belgium  and  other  continental  countries.  It  may  be  proper 
to  set  forth,  however,  that  companies  organized  en  commandite  are  partner- 
ships where  the  active  partners  are  liable  without  restriction  for  the 
liabilities  of  the  firm,  but  the  partners  en  commandite  are  liable  only  to 
the  amount  of  capital  which  they  have  invested. 

85 


National     Monetary     Commission 

contention  that  the  banking  system  of  Scotland  repre- 
sented the  successful  operation  of  a  system  of  note  issues 
by  corporations,  without  restriction  as  to  the  number  of 
such  corporations,  was  met  by  the  contention  that  the 
Scotch  banks  were  not  limited  liability  companies,  but 
that  all  their  shareholders  were  subject  to  unlimited  lia- 
bility and  that  nothing  prevented  the  creation  in  Belgium 
of  banks  of  issue  under  these  conditions.'' 

Departing  from  merely  academic  interpretation  of  the 
power  to  issue  notes  under  general  law,  which  had  not 
been  utilized  except  by.  one  or  two  banks  existing  at  the 
time  of  the  law  of  1850,  M.  Pirmez  took  up  the  principles 
of  the  banking  systems  differing  from  that  of  a  single 
bank  of  issue  which  might  possibly  be  adopted,  limiting 
them  to  (i)  plurality  of  authorized  banks,  (2)  regulated 
authority  to  create  banks,  (3)  unrestricted  liberty.  He 
declared  that  none  of  these  systems  would  increase  the 
credit  circulation,  which  the  National  Bank  was  inter- 
ested in  carrying  to  the  highest  possible  figure  indicated 
by  the  presentation  of  notes  for  redemption.  New 
currents  entering  the  circulation  could  not  fill  the  reservoir 
any  higher,  but  could  only  vary  its  contents  with  a 
variety  of  bank  bills  instead  of  those  of  a  uniform  type. 
The  right  of  the  State  to  intervene  to  protect  the  interests 
of  the  public  in  respect  to  uniformity,  safety,  and  conven- 
ience was  set  forth  as  follows :'' 

oThis  unlimited  liability  of  Scotch  shareholders  was  modified  as  the 
result  of  the  bank  failures  of  1879,  which  imposed  heavy  losses  upon 
small  holders  of  stock;  but  the  restrictions  imposed  upon  note  issues  by 
the  act  of  1845  might  have  afforded  to  M.  Pirmez  another  ground  of 
distinction  between  the  Scotch  system  and  that  existing  under  Belgian  law. 

&  Documents  Ofl&ciels:  1872,  p.  52. 


86 


National      Bank      of      Belgium 

"If  one  adhered  to  this  principle  of  absolute  noninter- 
vention, the  State  should  refrain  from  controlling  the 
weight  and  fineness  of  precious  metals;  it  should  suppress 
lawful  money  and  leave  to  everyone  to  satisfy  himself  of 
the  quality  of  the  gold  and  silver  presented  to  him;  it 
should  cease  to  concern  itself  with  the  system  of  weights 
and  measures  and  refrain  from  regulating  those  which  are 
used  in  business.  No  one  will  pretend  that  it  ought  to 
act  thus,  because  no  compensating  advantage  could  be 
found  in  the  inextricable  complications  which  would  arise 
from  this  revolution  in  the  usage  of  all  civilized  peoples. 
There  are  necessary  exceptions  to  this  principle  of  liberty, 
and  the  exceptions  should  be  extended  to  those  matters 
which  by  their  nature  have  to  be  accepted  by  all — by  those 
who  are  competent  to  judge  and  those  who  are  not — 
without  examination,  without  hesitation,  without  even  a 
doubt  to  delay  the  conclusion  of  a  transaction.  It  is  thus 
with  the  circulation  of  money;  and  it  should  be  thus  for 
the  same  reason  with  the  circulation  of  credit  paper.  The 
Government  would  fail  in  its  duty  if  it  did  not  take  the 
necessary  precautions  that  money  should  be  correct  in 
weight  and  fineness;  it  would  fail  equally  in  its  duty  if  it 
did  not  take  similar  measures  that  the  notes  which  replace 
cash  should  be  of  indisputable  value.  It  would  be  absurd 
to  condemn  individuals,  and  especially  the  least  enlight- 
ened, to  perpetual  operations  in  assaying;  it  would  not  be 
less  absurd  to  demand  that  the  unlettered  should  take 
account  of  the  soundness  of  banks.  In  this  respect  it  is 
unity  which  best  attains  the  object  sought.  It  gives  by 
means  of  the  most  efficient  control  a  more  absolute  safety; 


87 


National    Monetary     Commission 

it  alone  gives  to  bank  notes  the  stamp  of  a  value  which 
suffers  neither  comparison  nor  discussion,  but  exactly 
represents  the  monetary  system." 

The  loophole  through  which  opposition  to  the  existing 
National  Bank  might  find  an  opening  for  a  competitive 
system  of  note  issue  is  the  provision  of  the  law  of  1850, 
creating  the  National  Bank,  that  "no  bank  of  issue  shall 
be  constituted  by  shares  except  under  the  form  of  a 
joint-stock  company  and  by  virtue  of  a  law."  This  pro- 
vision nominally  leaves  to  the  Government  the  right  to 
authorize  a  new  bank  in  case  competition  with  the  National 
Bank  should  become  advisable.  Even  in  the  preHminary 
reports  on  the  creation  of  the  Bank,  however,  in  1850,  it 
was  declared  by  M.  Fr^re-Orban,  that  "the  end  which  it 
was  sought  to  attain  above  all  was  to  separate  discount 
and  issue  from  industrial  affairs;  it  was,  hence,  to  estab- 
lish unity  in  the  circulation  of  bank  bills  and  to  arrive  as 
soon  as  possible  at  the  convertibility  of  these  bills."  In 
summing  up  the  tendency  of  discussion  and  legislation  in 
Belgium,  even  Professor  Denis  declared  himself  a  partisan 
of  unity  of  issues  in  the  following  passage  from  his  report, 
submitted  to  the  chamber :  °' 

"It  follows  from  this  historical  review  that,  in  spite  of 
the  persistence  of  texts,  the  spirit  of  the  legislature  and  of 
the  Government  tends  more  and  more  energetically 
towards  unity  of  issue,  having  as  a  necessary  corollary  a 
single  bank,  and  to  condemn  more  decidedly  the  ultimate 
corrective  influence  of  limited  plurality,  as  tending  itself 
to  engender  incalculable  evils.  All  this  builds  up  historical 
obstacles,  which  go  on  accumulating,  against  the  idea  of 

«  Documents  Parlementaires :   1900,  p.  53. 
88 


National      Bank       of      Belgium 

exciting  ultimate  competition  to  the  existing  bank  and 
renders  the  practical  application  of  it  more  and  more 
illusory.  From  this  it  follows  that  if  the  texts  are  always 
opposed  to  the  absolute  consecration  of  a  monopoly,  the 
monopoly  of  fact  is  none  the  less  more  soHdIy  and  more 
definitely  estabhshed." 

METHODS   OF   COIvLECTiNG    PAPER. 

The  collection  of  commercial  bills  for  very  small  amounts 
is  accomplished  at  the  National  Bank  of  Belgium  through 
an  elaborate  organization,  as  at  the  Bank  of  France.  It  is 
necessary  to  employ  a  considerable  force  of  collectors  to 
make  the  rounds  of  the  small  shops  and  collect  paper  which 
is  due  by  the  proprietors.  By  the  terms  of  Article  VIII  of 
the  charter,  one  of  the  declared  objects  of  the  Bank  is  "to 
charge  itself  with  the  recovery  of  paper  which  may  be 
remitted  to  it  by  individuals  or  establishments."  In 
carrying  out  this  function  the  Bank  acts  as  a  sort  of  central 
collection  agency  for  other  institutions.  It  was  declared 
in  the  report  of  the  Chevalier  Descamps  to  the  Senate  at 
the  time  of  the  renewal  of  the  charter  in  1900: " 

"The  presentation  to  the  Bank  of  a  great  number  of 
obligations  which  have  matured  in  the  assets  of  other 
institutions,  tends  to  transform  a  part  of  the  business  of 
discount  into  a  simple  means  of  profiting  by  the  machinery 
of  the  central  bank  to  make  collections.  It  is  remarkable 
that  securities  find  their  domicile  in  the  assets  of  the  Bank 
only  for  an  average  of  thirty-nine  days.  This  is  an  impor- 
tant and  inevitable  cause  of  reduction  of  profits  for  '  the 
bank  of  bankers '  and  one  of  the  reasons  which  should  lead 


o  Documents  Parlementaires :  1900,  p.  421. 
89 


National    Monetary     Commission 

our  great  establishment  of  credit  to  seek  profitable  means 
of  development,  without  departing  from  its  proper  sphere." 

The  by-laws  governing  the  internal  management  of  the 
Bank  provided  in  1907  for  a  maximum  of  16  chief  collec- 
tors and  similar  employees,  36  collectors  of  the  first  class, 
50  of  the  second  class,  and  an  unlimited  number  of  the 
third  class.  The  chief  among  these  officials  receive  sala- 
ries ranging  from  2,200  to  2,800  francs  per  year;  those  of 
the  first  class,  from  1,800  to  2,200  francs  ($350  to  $420) ; 
those  of  the  second  class,  from  1,600  to  1,800  francs;  and 
those  of  the  third  class,  from  i  ,400  to  i  ,600  francs.  After 
five  years' service,  advances  may  be  made  of  200  francs  to 
the  chiefs,  and  100  francs  to  other  employ ees.° 

The  necessity  of  a  force  of  this  kind  to  make  regular  col- 
lections and  to  assert  the  legal  rights  of  the  Bank  is  indi- 
cated by  the  facts  published  in  the  annual  reports  in  regard 
to  defaulted  paper.  The  defaults  do  not  usually  cause 
losses  to  the  National  Bank,  because  the  paper  represents 
rediscounts,  and  that  which  is  not  paid  to  the  collectors  is 
returned  by  the  Bank  to  the  indorser  for  payment.  The 
ratio  of  delinquencies  naturally  becomes  a  little  greater  in 
a  year  of  business  depression,  like  1908,  than  in  a  year  of 
greater  business  activity. 

The  annual  report  of  the  Bank  for  1901  shows  that  the 
total  number  of  pieces  of  commercial  paper  subject  to  collec- 
tion during  the  year  1900  coming  from  the  assets  of  the 
National  Bank  and  of  the  National  Savings  Bank  was 
3,808,195,  representing  an  amount  of  3,471,781,776  francs 
($670,000,000).  On  this  sum  the  amount  due  at  Brussels 
consisted  of  730,497  pieces  for  a  capital  of  769.305.979 

oLoisOrganiques:  Statuts,  1907,  pp.  68-69. 
90 


National      Bank       of      Belgium 

francs  ($148,500,000).  Of  this  total  there  were  92,141 
pieces  (or  12.61  per  cent  of  the  whole)  which  were  not  paid 
at  maturity;  but  from  this  amount  54,215  pieces,  repre- 
senting a  capital  of  23,556,072  francs,  were  paid  to  the 
collectors  or  to  the  cashier  after  protest.  There  thus  re- 
mained 37,926  pieces  of  paper  unpaid,  representing 
11,677,482  francs  ($2,254,000),  which  was  returned  to  the 
indorsers  for  payment. 

In  the  provinces  there  were  129,734  pieces  of  paper 
which  were  not  paid  at  maturity,  but  71,982  pieces,  repre- 
senting a  capital  of  31,227,166  francs,  were  paid  to  the  col- 
lectors. There  thus  remained  57,752  pieces,  representing 
a  capital  of  15,265,098  francs,  which  were  returned  to  the 
indorsers  for  payment.  It  by  no  means  follows  that  this 
paper  was  ultimately  defaulted,  but  it  was  left  for  the  bank 
first  discounting  it  to  attend  to  the  detail  of  securing  its 
payment  after  making  prompt  reimbursement  to  the  Na- 
tional Bank.  The  percentages  of  paper  thus  returned 
were,  in  the  case  of  the  office  at  Brussels,  5.19  per  cent  of 
the  number  of  pieces  of  paper,  but  only  i  .5 1  per  cent  of  the 
total  amount  of  discounts.  In  the  provinces  the  showing 
was  even  better,  representing  3.87  per  cent  of  the  number 
of  pieces  discounted  and  0.93  of  the  amount  of  dis- 
counts.^ 

The  effect  of  the  depression  of  1908  is  shown  by  a  con- 
siderable increase  in  the  percentage  of  paper  returned  to 
the  indorsers  for  payment.  The  total  discounts  at  Brus- 
sels represented  796,449  pieces  of  paper  for  an  amount  of 
454.249.660  francs  ($88,100,000).  Of  this  number  107,212 
pieces  were  not  paid  at  maturity,  but  60,354  pieces,  repre- 

o Rapport:   1901,  p.  10. 
91 


National     Monetary     Commission 

senting  a  capital  of  28,474,994  francs,  was  paid  to  the  col- 
lectors or  at  the  Bank  after  protest.  There  remained 
46,858  pieces,  representing  a  capital  of  15,557,296  francs, 
which  were  returned  to  the  indorsers  for  payment.  In  the 
provinces,  out  of  total  discounts  to  the  number  of  i  ,676,65 1 , 
representing  a  capital  of  2,015,582,898  francs,  there  were 
161,635  pieces,  or  9.64  per  cent  of  the  whole,  which  were 
not  paid  at  maturity.  The  amount  paid,  however,  to  col- 
lectors was  89,992  pieces  for  an  amount  of  42,770,692 
francs.  This  left  71,643  pieces,  representing  a  capital  of 
19,973,986  francs  ($3,860,000)  to  be  reimbursed  by  the  in- 
dorsers. The  percentage  of  the  amount  of  total  discounts 
thus  returned  to  the  indorsers  for  payment  was  3.42  per 
cent  at  Brussels  and  0.99  per  cent  in  the  provinces.  " 

CURRENT   ACCOUNTS. 

The  National  Bank  of  Belgium  does  not  seek  to  attract 
deposits,  except  those  which  pertain  to  commercial  opera- 
tions. As  at  most  European  banks,  a  distinction  is  made 
between  credits  opened  in  favor  of  those  doing  business 
with  the  Bank,  and  consisting  essentially  of  loans  by  the 
Bank,  and  voluntary  deposits  by  persons  not  seeking  ac- 
commodation from  the  Bank.  The  term  used  for  credits 
in  favor  of  borrowers  and  others  having  accounts  with  the 
Bank  is  not  "deposits,"  but  "current  accounts"  (comptes 
courants).  The  National  Bank  has  a  large  department 
for  the  safe-keeping  of  securities,  and  the  operations  of 
this  department  appear  under  the  head  of  deposits,  while 
credits  in  favor  of  clients  of  the  Bank  are  stated  as  current 
accounts. 

o Rapport:   1909,  p.  11. 
92 


National      Bank       of      Belgium 

The  National  Bank  pays  no  interest  on  deposits  or  cur- 
rent accounts.  The  provision  that  interest  shall  not  be 
paid  is  embodied  in  the  regulations  of  the  Bank  (art.  27), 
but  not  in  the  organic  law.  This  subject  was  carefully 
considered  at  the  time  of  the  creation  of  the  Bank,  when 
an  amendment  authorizing  the  payment  of  interest  was 
rejected.  Upon  the  motion  of  M.  Frere-Orban  it  was 
decided,  by  2,3  votes  against  30,  to  leave  this  question  for 
the  statutes.  The  subject  again  came  under  debate  at 
the  renewal  of  the  charter  in  1872,  when  a  luminous  argu- 
ment was  made  by  M.  Pirmez  upon  the  fundamental  differ- 
ences between  current  accounts  drawing  no  interest  and 
deposits  drawing  interest.^ 

Capital,  declared  M.  Pirmez,  may  be  brought  to  a  bank 
in  connection  with  the  movement  of  business;  or  it  may 
be  brought  there  as  a  matter  of  investment.  If  the  bank 
does  not  pay  interest,  the  first  type  of  capital  alone  will 
come;  if  it  allows  interest,  it  makes  appeal  to  the  second 
type.  No  one  has  ever  disputed  that  the  National  Bank 
should,  like  all  establishments  of  the  same  sort,  receive  the 
capital  destined  to  play  a  part  in  the  current  movement  of 
commercial  operations.  By  transfers,  checks,  and  drafts 
the  funds  thus  deposited  serve  for  numerous  payments, 
which  are  accomplished  in  the  simplest  manner.  The 
result  is  substantially  the  same  as  that  derived  from  the 
issue  of  notes.  The  latter  replace  money  and  are  in  their 
turn  replaced  by  simple  written  forms.  They  belong  to 
the  functions  of  the  bank,  which  is  the  great  organism  of 
the  circulation,  and  lend  themselves  to  these  operations, 
realizing  to  the  profit  of  the  country  an  economy  in  the 
employment  of  metallic  money. 

«  Documents  Officiels:  1872,  pp.  54-56. 
93 


National    Monetary     Commission 

The  danger  of  such  deposits,  M.  Pirmez  declared,  is 
essentially  limited  and  may  be  easily  avoided.  The 
amounts  deposited  do  not  receive  a  pecuniary  remunera- 
tion, but  they  receive  a  remuneration  in  services  rendered. 
Such  deposits  are  made  only  when  one  expects  to  obtain 
in  the  movements  of  business  the  advantages  which  the 
bank  assures,  and  as  the  movements  of  business  are  for 
each  tradesman  a  continuing  series,  it  follows  that  after 
the  exhaustion  of  a  deposit  it  will  almost  always  be  re- 
newed. That  which  stimulated  the  first  deposit  stimu- 
lated the  later  ones.  Thus,  even  the  funds  which  com- 
mercial houses  leave  at  the  National  Bank,  rather  than 
keep  in  their  vaults  for  their  daily  needs,  disappear  only 
to  return  at  once,  because  they  constitute  the  available 
reserv^e  of  which  they  have  need.  From  this  perspective 
it  is  apparent  that  the  funds  thus  deposited  are  necessarily 
limited  by  the  absence  of  interest  allowances  and  that  the 
effect  of  this  limit  is  to  constitute  the  liabilities  of  the 
bank  in  this  respect  of  deposits  which  have  in  the  aggre- 
gate a  certain  fixity.    . 

This  situation,  M.  Pirmez  went  on  to  argue,  is  completely 
modified  if  by  the  allotment  of  interest  deposits  become  a 
method  of  investment.  Their  advantage  disappears,  to 
give  place  to  danger.  The  funds  thus  drawn  into  the 
bank,  no  longer  contributing  to  the  movement  of  business, 
have  no  influence  on  the  circulation.  They  would  realize 
none  of  the  progress  which  is  the  organic  end  of  the  Na- 
tional Bank.  There  were  other  establishments  in  the 
country  which  received  funds  and  paid  interest  upon  them. 
Such  funds,  through  the  intermediary  of  these  establish- 
ments, went  where  they  were  called  by  the  needs  of  in- 

94 


National       Bank       of      Belgium 

dustry  and  commerce.  What  profit  would  there  be  in 
withdrawing  them  from  one  place  to  send  them  to  another? 
While  the  advantages  of  such  an  operation  were  only  ap- 
parent, the  dangers  would  be  real.  No  limit  would  be 
fixed  by  conditions  to  these  investments.  To  what  figure 
might  they  not  rise,  to  what  fluctuations  might  they  not 
be  subjected,  in  periods  of  crisis? 

As  the  result  of  adherence  to  this  policy  the  debtor 
current  accounts  form  but  a  small  proportion  of  the  obli- 
gations of  the  National  Bank,  but  being  commercial 
accounts,  their  movement  is  extremely  rapid.  While 
the  current  accounts  of  other  Belgian  banks  have  increased 
enormously  with  the  expansion  of  the  business  of  the 
country,  the  balance  of  such  accounts  at  the  National 
Bank  has  remained  comparatively  stationary.  Thus,  the 
Societe  Generale,  which  still  does  a  large  business  in 
Belgium,  showed  an  increase  of  its  obligations  to  outsiders 
from  121,900,000  francs  ($23,530,000)  at  the  close  of  1890 
to  426,200,000  francs  ($82,260,000)  at  the  close  of  1908." 

The  movement  of  accounts  at  the  National  Bank  has 
increased  somewhat  within  the  generation  since  the  renewal 
of  the  charter  in  1872,  but  even  at  the  close  of  business 
on  December  31,  1908,  the  balance  of  current  accounts 
was  only  100,716,555  francs  ($19,450,000)  out  of  total 
liabihties  of  1,019,461,475  francs  ($196,800,000),  not 
including  deposits  of  securities  and  other  special  funds  in 
the  custody  of  the  Bank.  The  rapidity  of  the  movement 
of  these  balances  is  indicated,  however,  by  the  fact  that 
the  total  amount,  which  includes  the  deposit  of  the  General 
Bank   of   Savings   and    Retirement,   was    29,920,581,000 

o  Moniteur  des  Int^rfets  Mat^riels:  February  28,  1909,  p.  705. 

95 


National     Monetary     Commission 


francs,  or  more  than  four  hundred  times  the  amount  of 
the  average  annual  balance.  The  following  table  shows 
the  magnitude  of  these  transfers  of  funds  for  representative 
years: 

Movement  of  current  accounts. 


1892 
1897 
1900 
1901 
1902 
1903 
1904 
1905 
1906 
1907 
1908 


Total  receipts 
and  payments. 


Average  bal- 
ance diiring 
year. 


Francs. 

8, 061, 899, 170 

io,8ii,59S,  273 

IS. 296. 563.969 

14, 746, 108, 566 
14,686,  513,  704 
16,  292,  981,  371 
17,382,  097,077 
20,522,  122,333 
24.343.563.429 
29,  290, 671, 685 
29.920,  581,  752 


Francs. 
30,813,814 
42,  941.  738 
53.316,779 
60, 644. 173 
58.  764,  239 
54,496,884 
61,043,893 
63,  189,681 
68,817,481 
63.405.963 
63, 262, 728 


Balance, 
Dec.  31. 


Francs. 
69.340, 
93.892, 
81, 754. 
89.513. 
78,854, 
86,971. 
93.374. 
98,615, 
95.  128, 
87.573. 
100.  716, 


318 
S14 
197 
811 
638 
009 
199 
SS^ 
921 
813 
555 


Application  for  the  opening  of  a  current  account  is 
made  by  addressing  a  letter  to  the  governor  of  the  Bank 
or,  at  the  branches,  to  the  local  agent.  If  a  corporation 
is  concerned,  the  request  must  set  forth  the  character  of 
the  corporation  and  the  signatures  of  the  members, 
managers,  or  persons  who  have  authority  to  sign.  These 
applications  are  passed  upon  by  the  council  of  adminis- 
tration. When  granted  they  are  recorded  in  the  pro- 
ceedings and  the  interested  parties  are  advised.  Owners 
of  current  accounts  are  advised  every  six  months  of  the 
balance  to  their  credit,  and  are  required  to  acknowledge 
such  advices  and  state  if  the  balance  given  is  in  accord 
with  their  books. 

The  Bank  assumes  for  persons  having  current  accounts 
collections  and  payments  in  each  locaUty  where  it  has  an 


96 


National       Bank       of      Belgium 

office.  Payments  may  be  made  into  any  branch  of  the 
Bank  for  any  holder  of  a  current  account  at  Brussels  or 
in  the  provinces.  Deposits  of  paper  for  collection  must 
not  be  made  more  than  eight  days  before  maturity.  For 
paper  payable  in  the  locality  where  it  is  deposited  a 
charge  is  collected  of  lo  centimes  (2  cents)  and  one-eighth 
per  1,000  upon  the  amount  of  the  document.  For  paper 
payable  in  another  locality  than  that  where  it  is  deposited 
the  charge  is  20  centimes  per  piece  and  one-eighth  per 
1,000  upon  the  amount  of  the  document.  Paper  for 
collection  in  the  same  place  must  be  deposited  at  least 
three  days  before  maturity  by  noon.  Paper  to  be  col- 
lected elsewhere  must  be  deposited  at  least  j5ve  days 
before  maturity  by  10  o'clock.  Such  paper  should  bear 
the  receipt  of  the  person  having  the  account,  preceded 
by  the  words  "to  be  collected  through  the  intervention 
of  the  National  Bank  of  Belgium."  Such  documents 
should  be  presented  at  the  wicket  of  current  accounts  in 
a  closed  envelope  bearing  the  name  of  the  owner,  the 
number  of  pieces  and  amount  of  the  paper  deposited,  the 
date  of  maturity,  and  the  cost  of  collection.  Separate 
envelopes  should  be  provided  for  paper  to  be  collected 
in  the  same  place,  paper  without  charges  (sans  frais)  for 
collection  in  another  place,  and  paper  under  protest  for 
collection  in  another  place. 

The  Bank  does  not  make  itself  responsible  for  the  per- 
formance of  any  formality  nor  for  protested  paper  pay- 
able in  the  locality  where  the  owner  is  domiciled,  nor 
does  it  assume  any  responsibility  in  case  of  the  loss  of 
documents  which  are  remitted  to  it  for  collection.  The 
Bank  attends  to  the  protest  of  paper  drawn  on  a  different 

85519—10 7  97 


National     Mo  ii  c  t  a  r  y     Com  m  i s  s  i  o  n 

place  remitted  as  protested  paper.  The  Bank  will  not 
protest  checks.  These  are  to  be  included  among  the 
documents  described  as  paper  without  charges.  The 
Bank  formerly  advised  beneficiaries  of  payments  made  to 
their  credit  by  third  parties,  but  did  not  carry  out  this 
formality  in  regard  to  payments  made  for  the  account 
of  banking  and  exchange  houses.  During  the  year  1908 
this  rule  was  made  of  general  application.'^'  Payments 
are  required  to  be  of  at  least  1,000  francs,  but  various 
state  enterprises  are  exempt  from  this  requirement. 
While  scrutinizing  as  far  as  possible  the  regularity  of  the 
drafts  which  it  pays,  the  Bank  assumes  no  responsibility 
for  the  genuineness  of  the  signatures. 

The  owners  of  a  current  account  have  the  option  of 
making  acceptances  payable  at  the  office  of  the  bank  where 
the  account  is  kept.  An  acceptance  is  made  upon  an  advice 
signed  by  the  owner  of  the  current  account,  which  should 
reach  the  bank  at  least  three  days  before  maturity  and 
contain  the  names  of  the  drawers  and  their  domicile, 
with  the  amount  and  maturity  of  the  obligation.  Paper 
which  is  paid  is  returned,  upon  the  surrender  of  a  receipt, 
at  the  wicket  of  current  accounts.  Current  accounts 
may  be  canceled  by  resolution  of  the  council  of  adminis- 
tration. This  measure  is  taken  against  holders  who  do 
not  conform  to  the  requirements  of  the  rules  or  who  draw 
checks  or  orders  without  sufficient  funds.  * 

THE    CUSTODY   OF   SECURITIES. 

The  National  Bank  of  Belgium  performs  a  function 
common  to  most  European  banks,  which  is  performed  in 

o  Rapport:   1909,  p.  25. 

6  Lois  Organiques:  Statuts:  Rfeglement  d'Ordre  Int^rieur,  arts.  26-34. 

98 


National      Bank       of      Belgium 

America  chiefly  by  safe-deposit  companies.  This  is  the 
guardianship  of  securities,  precious  metals,  and  gold  and 
silver  money  in  deposit  boxes.  The  manner  of  dealing 
with  these  deposits  differs  somewhat  in  Europe,  however, 
from  the  method  pursued  in  the  United  States.  The 
principal  differences  consist  in  the  fact  that  deposits  and 
withdrawals  are  made  under  the  eye  of  the  bank,  and  the 
character  and  amount  of  the  deposits  are  on  record, 
instead  of  being  known  only  to  the  depositor. 

The  Bank  does  not  accept  deposits  in  a  collective 
name,  in  the  name  of  a  married  woman  without  separa- 
tion of  property,  or  for  minors  or  those  incapacitated, 
except  by  virtue  of  special  authority.  All  deposits  are 
inclosed  in  metal  boxes,  closed  with  a  key,  and  stamped 
with  the  seal  of  the  depositor.  The  dimension  of  the 
boxes  is  not  permitted  to  exceed  a  cubic  half  meter  (about 
a  half  yard)  and  each  such  box  constitutes  for  adminis- 
trative purposes  a  separate  deposit. 

At  the  time  of  the  creation  of  the  deposit  the  agents 
charged  with  this  service  may  require  the  opening  of  the 
box  which  contains  it  in  order  to  verify  its  character.  A 
record  is  made  in  duplicate  in  a  copying  book.  One  copy, 
indorsed  first  by  the  agent  who  has  received  the  deposit 
and  then  by  the  chief  accountant,  is  remitted  to  the 
depositor,  signed  in  the  name  of  the  governor  by  the 
director  charged  with  supervision  of  this  service.  The 
other  copy,  indorsed  with  the  signature  of  the  depositor, 
and  further  protected  at  the  same  time  by  his  seal, 
remains  on  file.  Contrary  to  the  policy  of  some  Euro- 
pean banks,  these  acts  or  certificates  of  deposit  are  not 
transferable.     The  bank  restores  the  deposit  only  on  pres- 

99 


National     Monetary     Commission 

entation  of  the  original  record  and  written  acknowledg- 
ment. It  reserves,  moreover,  the  right  to  make  such 
restoration  at  Brussels  or  at  the  branch  at  Antwerp, 
rather  than  at  the  agencies.'^ 

The  charge  for  the  custody  of  deposits  is  levied  on  an 
amount  not  less  than  25,000  francs  and  is  payable  in 
advance  for  each  six  months.  The  amount  is  one-half 
franc  per  1,000  francs,  but  can  not  be  less  than  25  francs. 
The  number  of  small  depositors  is  large,  the  number  in 
1899  having  been  i  ,024  out  of  a  total  number  of  depositors 
of  2,995.''  While  the  deposit  vaults  are  at  Brussels,  the 
agents  of  the  Bank  in  the  provinces  have  since  1897 
received  securities  for  transmission  to  the  head  office  of 
the  Bank.  Depositors  in  such  cases  are  required  to  pay 
the  costs  of  carriage  and  insurance. 

The  Bank  performs  not  merely  the  function  of  cus- 
todian, but  of  collector  and  administrator  of  securities  in 
its  custody,  as  do  other  European  banks.  A  slight  addi- 
tional charge  is  made  for  such  services,  but  they  are  per- 
formed with  much  saving  of  labor  to  the  depositor. 
Among  the  services  thus  performed  are  the  collection  of 
interest  and  dividends  upon  the  securities  on  deposit; 
the  collection  of  premiums  and  the  original  capital  in  case 
of  reimbursement;  the  ultimate  reinvestment  of  sums 
thus  collected;  payments  upon  securities  not  fully  paid; 
and  the  purchase  of  securities  to  be  deposited  and  the 
sale  of  those  already  on  deposit. 

The  fact  that  deposits  and  withdrawals  are  recorded 
when  made  enables  the  Bank  to  present  accurate  statistics 

o  Noel,  I,  p.  522. 

b  Documents  Parlementaires:   1900,  p.  427. 


National      Bank      of      Belgium 

of  the  face  value  of  such  securities.  The  amount  on  ac- 
count of  individual  depositors  has  increased  rapidly  in 
recent  years.  The  following  table  shows  the  amount  of 
such  deposits  by  individuals,  with  the  number  of  separate 
accounts,  the  number  of  depositors  with  a  capital  less 
than  5,000  francs,  and  the  charges  collected  by  the  Bank 
for  the  service  performed: 

Amount  and  character  of  safety  deposits. 


December  31 — 


1892 

1897 
1900 
1902 
1904 
1905 
1906 
1907 
1908 


Declared 
value. 


Francs. 
174,  920,  on 
2SS. 71S.488 
390, 762, 246 
523, 790, 188 
615,088,837 
674.085,374 
763, 713. 74S 
790, 884, 741 
831,031,  894 


Total 
number  of 
depositors. 


Number  of 

depositors 

below  5, 000 

francs. 


6,  236 

7.  124 
8,40s 
9.632 

10, 649 


2,  922 
3.357 
4.04s 
4,624 

S.IS2 


Amount 
collected. 


Francs. 
ISS.4SO 
203, 759 
242.  73S 
275, 766 
311, 068 
340,663 
399.031 
393. 444 
401,327 


The  deposits  represent  a  great  many  varieties  of  securi- 
ties. The  number  at  the  close  of  1904,  when  the  figures 
were  first  included  in  the  annual  report,  was  2,403,  which 
increased  at  the  close  of  1908  to  3,186. 

These  voluntary  deposits  of  individuals  represent  only  a 
fraction  of  the  amount  of  securities  in  the  custody  of  the 
National  Bank.  By  far  the  greater  portion  of  such 
deposits  comes  from  various  pubHc  funds  of  which  the 
Bank  has  been,  under  various  laws,  made  the  legal  cus- 
todian. Reference  to  the  rapid  increase  of  these  de- 
posits and  their  origin  is  made  in  this  report  in  connection 
with  the  services  performed  by  the  Bank  for  the  State. 


National     Monetary     Co  m  m  i  s  s  i  o  n 


Some  idea  of  the  increase  in  the  amount  within  the  brief 
inters'al  of  ten  years  may  be  gathered  from  the  following 
table : 

Deposits  of  securities  by  the  Government. 


December  3 1 — 


1900 
1902 
1904 
190s 
1906 
1907 
T908 


Deposits  in  pub- 
lic funds. 


Securities  of 

the  savings 

bank. 


Francs. 
998,625.433   ■ 
995.330.  229 
I.  784,449,059 
1.859,  113,471 
2,075,088,082   j 
2, 083,  175, 768  I 
I,  845. 206, 829   i 
I, 752, 298, 028 


Francs. 
152.934.897 
198.579,470 
219. 195.095 
235.545.265 
247.  026,  600 
268,903,352 
241,356,868 
234,  322,  680 


OflScial 
bonds,  etc. 


Francs. 
13, 120,803 
13,504,687 
13,265,465 
II, 767, 128 
12,038,567 
12,049,845 
12,  790,  I7S 
12, 598, 206 


MANAGEMENT    OF   THE    BANK. 

The  management  of  the  National  Bank  is  in  the  hands 
of  a  governor  and  six  directors,"  who  make  tip  the  admin- 
istrative council.  The  governor  is  appointed,  suspended, 
and  dismissed  by  the  King.  The  six  directors  are  elected 
by  the  shareholders.  The  shareholders  also  elect  the 
council  of  censors,  a  supervisory  body  which  inspects  the 
accounts  and  whose  approval  is  required  for  important 
measures  of  policy. 

The  governor  represents  the  State  in  its  control  over 
the  operations  of  the  Bank.  He  is  appointed  for  five  years 
and  may  be  reappointed  indefinitely.  He  can  not  be  a 
member  of  the  legislative  body  or  draw  a  state  pension. 

a  The  ^vord  "director"  (directeur)  as  used  on  the  Continent  does  not 
mean  merely  a  member  of  a  supervisory  board,  as  in  the  United  States,  but 
rather  an  active  officer,  conforming  more  to  the  American  term  "officer" 
or  "manager." 


National       Bank       of      Belgium 

He  presides  in  all  councils  and  meetings  of  the  Bank,  exe- 
cutes their  decisions,  and  is  charged  with  the  enforcement 
of  the  laws  and  regulations.  He  has  the  right  to  suspend 
the  taking  effect  of  decisions  made  by  the  administrative 
council,  in  order  to  submit  them  to  the  general  assembly 
of  the  shareholders,  which  he  may  call  for  urgent  emer- 
gencies. It  is  his  duty  to  suspend  and  report  to  the  Gov- 
ernment every  act  of  the  council  which  he  deems  contrary 
to  the  statutes  of  the  Bank  or  adverse  to  the  interests  of 
the  State.  If  the  Government,  having  considered  the  con- 
clusions reached  by  the  governor,  fails  to  come  to  a  decision 
within  a  fortnight  after  his  protest,  the  act  can  be  carried 
out. 

The  governor  has  the  casting  vote  in  meetings  of  the 
administrative  council.  He  signs  all  documents  making 
engagements  for  the  Bank  after  they  have  received  the 
signatures  of  the  secretary  and  treasurer,  or  one  director 
in  lieu  of  either.  He  represents  the  administrative  council 
in  the  courts,  and  also  has  authority  over  all  the  agents 
of  the  Bank,  and  can  suspend  them  without  reference  to 
the  administrative  council.  He  must  own  50  shares  of  the 
Bank's  stock  as  security  for  the  performance  of  his  duty. 
The  King  selects  a  vice-governor  from  among  the  directors, 
who  acts  instead  of  the  governor  in  case  of  the  latter 's 
absence,  incapacity,  or  suspension. 

The  six  directors  are  chosen  by  the  general  assembly, 
and  must  be  Belgian  citizens  (native-born  or  naturalized) 
and  reside  in  Brussels.  They  are  appointed  for  six  years, 
and  may  be  reelected.  Each  director  must  own  at  least 
25  shares  in  the  National  Bank,  and  none  of  them  can 


103 


N  a  t  i  0  u  a  I     Monetary     Commission 

belong  to  the  administrative  council  of  any  other  bank. 
Besides  their  general  functions,  each  is  intrusted  with  the 
control  of  one  department  or  more  of  the  Bank,  and  has 
authority  over  the  employees  under  him.  Every  director 
receives  a  salary  of  6,000  francs  and  has  a  share  in  the 
profits.  The  director  filling  the  office  of  vice-governor  has 
an  extra  allowance  of  3,000  francs.  The  administrative 
council,  consisting  of  the  governor  and  directors,  holds 
regular  meetings  three  times  a  week,  and  special  meetings 
whenever  necessary.  It  considers  all  the  concerns  of  the 
Bank,  especially  the  rate  on  credits  and  advances,  and  dis- 
count affairs  in  general,  and  gives  particular  attention  also 
to  the  purchase  of  securities  and  to  legal  issues  in  which 
the  Bank  may  become  involved.  Finally,  it  appoints  and 
discharges  the  employees  and  determines  their  salaries. 
In  all  matters  it  advises  with  the  censors. 

The  censors  are  named  by  the  general  assembly  of  the 
shareholders  for  terms  of  three  years.  They  retire  in 
different  years — three  going  out  the  first  year,  two  the 
second,  and  two  the  third.  Each  censor  must  have  10 
shares  of  bank  stock.  They  also  receive  a  portion  of  the 
profits.  The  council  of  censors  meets  at  the  call  of  the 
governor  whenever  conditions  make  it  desirable,  but  not 
less  than  once  a  month.  It  requires  the  presence  of  a 
majority  of  the  seven  censors  to  do  business.  They  have 
supervision  over  all  transactions,  audit  the  books,  and 
vote  the  budget  of  expenses  prepared  by  the  administra- 
tive council.  They  are  responsible  for  modification  of 
the  discount  rate  and  all  important  matters  affecting  dis- 
counts and  advances. 


104 


National      Bank       of      Belgium 

The  governor,  directors,  and  censors  constitute  the 
general  council,  which  meets  on  the  last  Saturday  of  each 
month.  The  general  council  keeps  under  its  cognizance 
the  situation  of  the  Bank,  and  acts  on  all  questions  sub- 
mitted to  it  relating  to  the  laws  and  regulations.  It 
apportions  the  profits,  and  controls  matters  relating  to 
the  manufacture  and  issue  of  bank  notes.  It  selects  a 
discount  committee  from  among  merchants  or  old  clients, 
which  examines  the  paper  presented  for  discount  and 
determines  what  to  accept  and  what  to  reject. 

The  State  designates  a  government  commissioner  (whose 
salary  the  bank  pays) ,  to  exercise  the  functions  of  a 
comptroller,  especially  with  regard  to  discounts  and  the 
note  circulation.  He  has  the  right  to  look  into  the  busi- 
ness condition  of  the  Bank  and  to  inspect  its  books.  He 
has  the  right  to  attend  meetings  of  the  various  boards  of 
the  Bank,  including  the  general  assembly,  and  to  speak 
at  such  meetings,  but  not  to  vote. 

The  compensation  of  the  governor,  fixed  by  the  King, 
is  18,000  francs,  but  in  addition  he  receives  the  use  of  a 
fine  house,  handsomely  furnished  and  heated,  with  several 
employees  furnished  by  the  Bank,  and  a  share,  with  the 
directors,  in  the  annual  profits.  The  share  allotted  to  the 
governor  and  directors  is  4  per  cent  of  the  excess  of  profits 
after  the  payment  of  the  first  dividend  of  4  per  cent  to 
the  shareholders.  The  proportion  of  the  profits  may 
however,  by  article  61  of  the  statutes,  be  limited  by  vote 
of  the  general  assembly  to  80,000  francs  semiannually  for 
the  board  of  directors  and  17,500  francs  for  the  censors. 

The  general  assembly  of  the  shareholders,  which  meets 
twice  a  year,  or  more  often  if  required,  consists  of  those 

105 


National     Monetary     Commission 

shareholders  who  are  owners  of  at  least  lo  registered 
shares,  which  must  be  registered  in  their  names  for  at 
least  twenty  days  before  the  meeting  or  be  deposited  at 
the  head  office  of  the  Bank  or  at  agencies  designated  by 
the  directors.  As  the  shares  of  the  Bank  sell  for  about 
4,500  francs,  a  person  qualified  to  vote  in  the  general 
assembly  must  have  an  investment  of  the  present  value  of 
about  45,000  francs  ($8,6^5).  A  shareholder  can  be  rep- 
resented by  proxy  only  by  another  shareholder  entitled  to 
vote,  but  associations  and  corporations  may  be  represented 
by  a  member  designated  for  the  purpose  and  minors  and 
persons  under  guardianship  by  their  guardians  or  trustees. 
No  one  is  allowed  more  than  5  votes  as  a  shareholder, 
whatever  may  be  the  number  of  his  shares,  nor  more  than 
5  votes  as  attorney,  whatever  may  be  the  number  of  his 
principals. 

The  regular  meetings  of  the  general  assembly  take  place 
on  the  last  Monday  of  February  and  the  last  Monday  of 
August.  The  assembly  passes  upon  the  balance  sheet  of 
the  preceding  half  year,  if  necessary,  and  that  of  the  Feb- 
ruary meeting  receives  the  report  of  the  directors  on  the 
operations  of  the  previous  year  ending  December  31. 
At  the  August  meeting  the  directors  and  the  censors  are 
elected  who  are  to  take  office  at  the  beginning  of  the  fol- 
lowing year,  and  at  either  of  these  meetings  vacancies 
may  be  filled  which  have  been  caused  by  death,  resignation, 
or  otherwise. 

An  extraordinary  meeting  of  the  general  assembly  may 
be  called  whenever  the  administrative  council  considers 
it  expedient.  Such  a  special  meeting  must  be  called  when 
it  is  demanded  by  the  board  of  censors  or  by  not  less  than 

106 


National      Bank       of      Belgium 

20  shareholders  entitled  to  vote  and  also  when  the  number 
of  directors  or  the  number  of  censors  is  reduced  to  4. 
Sucli  meetings  are  called  by  registered  letters  sent  to 
shareholders  of  record  having  a  right  to  vote  at  least 
fifteen  days  in  advance  of  the  meeting  and  by  publication 
in  the  "  Moniteur  "  and  in  two  other  principal  daily  papers 
of  Brussels  one  month  before  the  date  of  the  meeting. 
The  latter  interval  may,  however,  be  reduced  to  fifteen 
days,  if  the  general  council  consider  it  necessary. 

The  general  assembly  may  deliberate  on  subjects  set 
forth  in  the  notice  of  the  meeting,  and  which  are  placed 
before  them  either  by  the  directors  or  the  board  of  censors, 
and  also  on  propositions  signed  by  5  members  which 
have  been  transmitted  to  the  directors  at  least  ten  days 
before  the  meeting,  to  be  placed  on  the  order  of  the  day. 
Elections  and  revocations  are  made  by  secret  ballot.  On 
other  propositions  and  subjects  the  voting  is  done  by  yeas 
and  nays.  A  majority  of  those  voting  is  required  to  elect 
an  officer.  Directors  or  censors  can  be  dismissed  only  by 
a  vote  of  three-quarters  of  the  votes  cast,  which  must 
represent  at  least  one-half  of  the  capital  stock  of  the  bank." 

The  acts  of  the  general  assembly  are  valid  only  when  the 
number  of  shares  represented  is  at  least  20,000  out  of  the 
50,000  outstanding.  At  a  meeting  where  the  absence  of 
a  quorum  is  thus  developed  it  is  permissible  for  the  owners 
of  less  than  10  shares  to  combine  and  place  them  in  the 
charge  of  shareholders  having  the  right  to  vote.  Resolu- 
tions at  such  meetings  must  be  carried  by  a  vote  of  at 
least  two-thirds  and  are  effective  only  when  approved  by 
the  governor. 

«  Lois  Organiques:  Statuts,  pp.  36-39. 
107 


National     Monetary     Commission 

In  1898  the  number  of  registered  shares  was  26,200  and 
shares  to  bearer  23,800.  At  the  close  of  1908  the  number 
registered  was  24,221  and  the  number  to  bearer  was  25,779. 
In  1898  the  registered  shares  were  divided  between  999 
owners,  of  which  673  possessed  at  least  the  10  shares 
required  to  participate  in  the  annual  meetings.  In  1908 
the  24,221  registered  shares  were  distributed  between  889 
o^vners,  of  which  584  possessed  at  least  10  shares. 

INTERNAIv   ORGANIZATION   AND   PERSONNEL. 

Employment  in  the  clerical  grades  of  the  National  Bank 
of  Belgium  is  not  remunerated  with  large  salaries,  but  is 
likely  to  be  permanent  if  the  employee  is  faithful,  and  is 
followed  by  allowances  for  old  age  and  retirement  after  a 
certain  period  of  service.  In  order  to  enter  the  employ- 
ment of  the  Bank  it  is  necessary  to  be  not  less  than  1 8  nor 
more  than  28  years  of  age.  The  applicants  must  pass  an 
examination  and  be  in  position  to  furnish  the  bond  re- 
quired for  faithful  service.  The  examination  may  be  dis- 
pensed with  in  the  case  of  graduates  of  commercial  and 
consular  schools.  Preference  is  given  to  graduates  know- 
ing, in  addition  to  French,  the  Flemish,  English,  and  Ger- 
man languages,  and  in  those  positions  involving  contact 
with  the  Flemish  element  of  the  population,  including 
Brussels,  knowledge  of  Flemish  is  required.  No  one  is 
promoted  to  a  higher  grade  unless  he  has  served  two  years 
in  his  present  grade,  and  no  one  can  attain  an  increase  of 
salary  until  he  has  served  two  years  at  his  current  rate  of 
pay  when  the  latter  is  above  1,800  francs  ($347.40);  but 
these  rules  may  be  suspended  if  the  interests  of  the  Bank 
require  or  if  exceptional  services  are  to  be  recompensed. 

108 


National      Bank       of      Belgium 

The  council  of  administration  is  also  authorized  to  confer 
special  employments,  either  temporary  or  permanent,  upon 
persons  chosen  from  the  ranks  of  the  Bank  or  from 
outside.'* 

Employees  who  are  incapable  of  fulfilling  their  functions 
by  reason  of  temporary  disability,  those  who  have  ob- 
tained a  leave  for  a  long  term,  those  whose  places  have 
been  suppressed  and  to  whom  a  waiting  allowance  has  been 
allotted,  and  those  who  have  been  suspended  from  their 
functions  by  way  of  discipline,  are  put  in  a  class  known  as 
the  "inactive."  Inactivity  is  limited  to  two  years,  but 
may  in  special  cases  be  prolonged  to  four  years  by  decision 
of  the  council.  Those  who  are  on  the  inactive  roll  by  rea- 
son of  temporary  disability  enjoy  a  compensation  of  half 
their  regular  salary  where  they  have  seen  ten  years  of  serv- 
ice or  less  and  three-quarters  of  their  regular  salary  where 
they  have  seen  more  than  ten  years'  service.  It  is  left  to 
the  administrative  council  to  fix  the  waiting  salary  of  those 
who  are  on  the  inactive  list  as  a  measure  of  discipline. 

Employees  are  not  allowed  to  hold  a  place  outside  the 
Bank  unless  by  authority  of  the  council  of  administration. 
Absolute  secrecy  is  enjoined  upon  employees  in  regard  to 
all  the  operations  of  the  estabUshment.  The  penalties 
provided  for  violation  of  the  rules  of  the  Bank  are  the 
reprimand,  deprivation  of  salary,  suspension  of  functions, 
transfer  to  the  inactive  hst,  reduction  by  one  or  several 
grades,  and  dismissal.  These  penalties  can  be  inflicted 
only  after  the  employee  has  had  an  opportunity  for  expla- 
nation.'' 

o  Lois  Organiques:  Statuts,  pp.  62-66. 
&  Ibid.,  pp.  67-68 


109 


N  a  t  i  0  n  a  I     Mo  n  et  ar  y     Co  m  mission 

The  hours  during  which  the  Bank  is  open  to  the  pubUc 
are  from  9.30  to  3.  The  working  hours  are  from  9.30  to  4, 
but  employees  are  bound  to  work  longer  if  the  needs  of  the 
service  require.  Leaves  of  absence  are  not  ordinarily  al- 
lowed to  exceed  two  weeks. 

The  salaries  paid  to  subordinates  at  the  Bank,  as  already 
stated,  are  small,  in  accordance  with  the  modest  cost  of 
li\'ing  in  Belgium.  The  adequacy  of  these  salaries  was  the 
subject  of  a  lively  discussion  in  the  Chamber  of  Deputies 
pending  the  renewal  of  the  charter  in  1900.  An  amend- 
ment was  offered  by  M.  Bertrand,  proposing  that  the  Bank 
should  estabhsh  a  scale  of  salaries  which  should  be  sub- 
mitted for  approval  to  the  Minister  of  Finance  and  Public 
Works  and  that  no  salary  should  be  less  than  1,200  francs 
($231.60)  per  year.  It  was  further  provided  that  active 
collectors  should  draw  from  1,800  to  2,100  francs  and  that 
the  minimum  for  employees  in  the  bureaus  should  be  i  ,500 
francs.*^  This  amendment  was  ultimately  rejected  by  a 
vote  of  19  in  the  aflfirmative  and  61  in  the  negative,  but  the 
discussion  threw  some  interesting  light  on  the  position  and 
compensation  of  various  classes  of  employees.  The  Social- 
ist members  made  themselves  champions  of  the  minor  em- 
ployees of  the  Bank  and  pointed  out  the  difficulty  of  living 
on  the  modest  allowances  which  they  received. 

M.  Defnet  declared  that  the  National  Bank  recruited  a 
certain  number  of  its  collectors  from  former  subaltern 
officers  of  the  army,  who  gave  up  their  posts  after  an  ex- 
perience of  eight  years  without  any  trade  or  position  and 
became  applicants  for  places  on  the  poHce  or  at  the  Bank. 
These  young  men,  he  declared,  who  had  practically  been 

o  Discussions  Parlementaires:  1900,  sitting  of  February  9,  p.  727. 


National       Bank       of       Belgium 

employed  for  sixteen  years  in  the  army,  knew  nothing 
of  civil  life.  They  are  thoroughly  disciplined  by  long 
service  in  the  regiment  and  the  Bank  seeks  them  out  and 
offers  them  the  place  of  a  collector  at  an  average  of  70 
francs  per  month,  the  minimum  which  is  guaranteed.  M. 
Defnet  read  a  letter  from  one  of  these  employees,  declar- 
ing that  their  situation  was  far  from  being  brilliant  or  en- 
viable. Entering  the  service  as  supernumeraries  at  4 
francs  per  day  with  a  minimum  pay  assured  of  70  francs 
($13.51)  per  month,  they  obtained  after  two  years  an  in- 
crease of  50  centimes  per  day  and  a  minimum  of  80  francs 
($15.46)  per  month.  After  five  years  they  are  accorded  5 
francs  per  day,  with  a  minimum  of  90  francs  per  month. 
At  the  end  of  five  years'  apprenticeship  of  this  sort  they 
became  collectors  of  the  second  class  at  1,400  francs 
($270.20)  per  year,  where  they  remained  for  six  years  be- 
fore obtaining  1,600  francs,  and  another  six  years  before 
being  promoted  to  the  first  class  with  1,800  francs.  M. 
Defnet  continued  by  referring  to  the  brigadiers,  who  super- 
intend the  collectors,  who  might  at  the  end  of  twenty-five 
years  of  service  draw  2,400  francs  ($463.20).  These  em- 
ployees, he  declared,  were  daily  in  contact  with  the  public, 
which  subjected  them  to  expenses  greater  than  those  of 
other  employees  or  laborers,  including  being  well  clothed 
and  wearing  clean  linen.  Continuing,  M.  Defnet  ex- 
claimed : 

"  Do  you  beHeve,  gentlemen,  that  it  is  easy  to  live  at 
Brussels,  where  the  cost  of  living  is  so  high,  where  rents 
are  at  unapproachable  figures,  on  70  francs  per  month? 
Do  you  believe  that  it  is  possible,  with  such  a  salary,  to 
honestly  support  a  family?     And  even  this  monthly  salary 


National     Monetary     Commission 

of  70  to  80  francs  they  do  not  always  receive,  for  here  is 
what  I  find  in  the  rules  regarding  the  collectors  of  the 
Bank:" 

"  '  Errors  of  calculation,  the  acceptance  of  money  which 
is  not  legal  tender,  bills  torn  or  valueless,  shall  be  charged 
to  them.' 

"  The  fund  for  these  collectors  is  not  available  for  errors 
below  25  francs,  and  it  is  these  errors  which  are  most 
numerous." 

It  developed  during  the  debate  that  the  limitation  au- 
thorized by  article  61  of  the  statutes,  by  which  the  share 
of  the  profits  allotted  to  the  directors  might  be  limited 
to  80,000  francs  for  each  six  months,  had  not  been  put  in 
operation.  It  w^as  stated  that  the  governor  at  that  time 
received  50,000  francs  as  his  share  of  the  annual  profits, 
making  wdth  his  salary  of  18,000  francs  a  total  compen- 
sation of  68,000  francs  ($13,124)  in  addition  to  his  hand- 
some habitation — furnished,  heated,  and  Hghted.  The 
vice-governor  received  47,000  francs,  each  of  the  directors 
44,000  francs,  and  the  censors  7,500  francs. 

It  was  suggested  by  the  representatives  of  the  Govern- 
ment that  the  adequacy  of  the  salaries  paid  was  demon- 
strated by  the  ability  of  the  Bank  to  obtain  all  the  help 
it  needed  in  competition  with  the  joint-stock  and  private 
banks  and  other  employments.  It  was  declared  also  by 
M.  Liebaert,  Minister  of  Railways,  Posts,  and  Telegraph, 
that  there  was  a  fund  of  73,000  francs  for  making  up  losses 
on  the  part  of  the  collectors  to  the  amount  of  50  per  cent 
where  such  losses  were  above  20  francs.  It  would  not  do, 
said  M.  Delbeke,  to  hold  the  employees  entirely  free  from 

o  Discussions  Parlementaires:  1900,  p.  737. 


National      Bank       of      Belgium 

responsibility  for  losses,  because  it  would  impair  their  vigi- 
lance. M.  Delbeke  declared  also  that  he  did  not  claim 
perfection  for  the  entire  mechanism  of  the  Bank  and  that 
a  project  for  the  improvement  of  the  position  of  the  em- 
ployees was  in  course  of  preparation.  This  declaration 
was  greeted  with  derision  from  the  Socialist  benches,  and 
it  was  said  by  M.  Bertrand  that  it  recalled  the  old  sign  of 
the  barber,  "Free  shaves  to-morrow."'^ 

The  promise  of  M.  Delbeke  was  not  carried  out  on  a  large 
scale  at  that  time,  but  in  recent  years  better  care  has  been 
taken  of  the  employees  and  the  Bank  has  extended  the 
insurance  fund  for  retirement  and  old  age.  For  several 
years  small  amounts  were  set  aside  for  this  purpose,  reach- 
ing during  the  first  six  months  of  1906,  31,246  francs 
($6,000).  At  the  close  of  1906,  however,  it  was  recom- 
mended that  out  of  the  abundant  earnings  of  the  Bank 
a  sum  should  be  set  aside  of  250,000  francs  for  the  exten- 
sion of  institutions  of  insurance  and  old  age.  It  was  stated 
in  the  annual  report  for  1 906  that  the  organization  of  such 
a  fund  among  the  personnel  of  the  Bank  extended  back 
to  1880,  but  so  numerous,  varied,  and  unforseen  had  been 
the  necessities,  which  the  Bank  could  not  afford  to  disre- 
gard in  a  personnel  of  695  employees,  that  the  fund  pre- 
viously provided  was  incapable  of  taking  charge  of  the 
widows,  orphans,  and  employees.  The  administration  had 
never  failed  to  meet  such  emergencies,  but  had  met  them 
chiefly  from  general  resources.  It  was  recommended  that 
a  permanent  fund  be  established  and  for  this  purpose  the 
sum  of  250,000  francs  was  allotted  for  the  second  half  of 
the  year  1906. 

«  Discussions  Parlementaires:  1900,  p.  745. 
85519—10 8  113 


National    Monetary     Commission 

The  report  for  1907  declared  that  the  council  of  admin- 
istration had  been  pursuing  the  study  of  the  reorganization 
and  extension  of  the  insurance  institutions  and  had  reached 
a  rational  solution  of  the  question.  From  January  i ,  1 880, 
to  December  31,  1907,  it  was  announced  that  the  force  of 
the  central  administration  of  the  branch  at  Antwerp  had 
been  affiliated  with  a  tontine  insurance  institution,  main- 
tained by  the  deduction  of  4  per  cent  from  salaries  and  by 
an  equal  grant  on  the  part  of  the  Bank.  This  organiza- 
tion settled  only  imperfectly  the  question  of  retirement, 
because  the  fund  conferred  on  its  participants  only  the 
prospects  of  an  indeterminate  allotment,  which  it  was  in- 
convenient to  reduce  to  definiteness.  It  was  better, 
evidently,  to  substitute  for  this  condition  the  certainty  of 
a  retirement  pension  bearing  some  relation  to  the  position 
which  the  employee  had  occupied  at  the  Bank.  The  same 
uncertainty  existed  in  the  case  of  death  of  an  employee 
in  relation  to  his  widow  and  children.  The  new  organi- 
zation, however,  permitted  the  employees  to  depend  in 
advance  on  the  allotments  which  would  fall  to  them  at 
the  time  of  retirement  and  gave  them  the  assurance  that, 
if  they  died  before  or  after  retirement,  their  widows  and 
children  should  be  beyond  the  reach  of  want.  The  funda- 
mental character  of  the  new  institution,  embracing  not 
only  the  entire  personnel  of  the  central  administration 
and  of  the  branch  at  Antwerp,  but  also  the  agents  in  the 
provinces  and  their  employees,  was  as  follows: 

"  I.  Every  functionary  or  employee  has  the  right,  at  the 
age  of  retirement,  to  a  life  pension  equal  to  two-thirds  of 
his  final  salary. 


114 


National       Bank       of      Belgium 

"2.  The  death  of  an  agent  confers  on  his  widow  the 
right  to  the  immediate  enjoyment  of  a  Hfe  pension,  repre- 
senting an  important  percentage  of  the  pension  of  the 
husband. 

"3.  Every  orphan  of  the  father  or  mother  less  than  18 
years  of  age,  receives  a  temporary  allowance  up  to  18 
years,  equal  to  300  or  500  francs." 

In  order  to  assure  the  regular  working  of  the  new  insti- 
tution, the  general  council  of  the  Bank  did  not  hesitate  to 
vote  a  subvention,  to  be  included  in  general  expenses, 
which  might  reach  10  per  cent  of  the  total  amount  of 
wages  and  salaries.  In  order  to  anticipate  demands  upon 
the  fund  after  January  i,  1908,  extraordinary  grants 
were  made,  rising  to  a  total  of  1,000,000  francs.'^  This 
sum  was  made  up  of  the  allotment  for  the  second  half  of 
1906  of  250,000  francs;  the  first  half  of  1907,  400,000 
francs;  and  the  second  half  of  1907,  350,000  francs.  The 
regular  allotments  for  the  two  half  years  of  1907  had  risen 
respectively  to  33,933  francs  and  to  34,645  francs.  Under 
the  working  of  the  new  plan,  however,  these  allotments 
were  increased  for  the  first  half  of  1908  to  123,421  francs 
and  the  second  half  of  1908  to  130,836  francs,  making  a 
total  for  the  year  of  254,257  francs  ($49,000).'' 

BRANCHES   AND   DISCOUNT   OFFICES. 

The  system  of  branches  of  the  National  Bank  of  Bel- 
gium is  of  a  distinctive  character.  There  is,  strictly 
speaking,  but  one  actual  branch  of  the  central  institution 


«  Rapport,  sur  les  op(5rations  dc  I'antK^'e,  1907,  pp.  25-27. 
ii  Rapport,  1908,  R6sum6  du  compte  de  Profits  et  Pertes. 


"5 


National     Monetary     Commission 

at  Brussels.  This  branch  is  located  at  Antwerp,  the  chief 
commercial  city  of  Belgium.  The  scope  of  the  activities 
of  the  Bank,  however,  is  far  from  being  limited  to  these 
two  establishments.  There  are  39  agencies,  with  which 
are  associated,  to  the  number  of  thirty,  what  are  known 
as  discount  offices  (comptoirs  d'escompte).  These  dis- 
count offices  act  as  guarantors  for  much  of  the  paper  dis- 
counted by  the  Bank.  They  are  usually  private  partner- 
ships (societes  en  nom  collectif) ,  but  they  may  be  consti- 
tuted under  several  other  forms,  as  joint-stock  companies 
or  even  as  cooperative  companies.  It  was  declared,  in 
the  replies  of  the  Government  to  certain  questions  of  the 
central  committee  of  the  cham.bers,  in  1899,  that  there 
existed  no  definite  requirement  as  to  form  in  the  organiza- 
tion of  the  comptoirs,  but  that  the  administration  of  the 
Bank  was  bound  to  determine  if  the  form  proposed  would 
afford  the  necessary  guaranties.  In  one  case  at  least  a 
corporation — the  Bank  of  Flanders — had  performed  the 
functions  of  a  discount  office  at  Ghent,  during  a  consider- 
able period.^'  The  character  of  business  done  by  these 
offices  is  thus  defined  by  M.  des  Essars:^ 

"Under  the  name  of  comptoirs  d'escompte  (discount 
bureaus),  associations  of  persons  are  permitted  by  the 
general  council  to  discount  such  paper  as  is  specified  by 
the  regulations  of  the  Bank  at  rates  and  under  conditions 
prescribed  by  the  general  council.  The  paper  admitted 
by  the  comptoirs  is  indorsed  to  the  Bank  direct.  Each 
comptoir  is  held  responsible ;  so  that  bad  paper  is  returned 
to  the  bureau  from  which  it  emanated,  and  which  has  to 

a  Documents  Parleraentaires :   1900,  p.  194. 

b  A  History  of  Banking  in  all  the  Leading  Nations,  III,  p.  272. 

116 


National       Bank       of      Belgium 

make  good  the  amount.  The  individuals  associated  in 
the  comptoir  receive  a  commission  on  paper  that  they 
discount  to  remunerate  them  for  their  trouble  and  reward 
them  for  the  risk  they  take.  The  commissions  are 
determined  by  special  arrangements.  In  general,  the 
discount  bureaus  are  located  at  the  agencies  of  the  Bank, 
the  agents  lending  them  half  of  their  offices  for  their 
discount  business  and  their  bookkeeping." 

A  form  of  bond  (cautionnement)  is  required  in  most 
cases  from  the  discount  office.  This  bond  is  fixed,  not 
by  any  rigid  rule,  but  according  to  circumstances.  The 
Bank,  in  fixing  the  bond,  takes  into  consideration  the 
importance  of  the  business  of  the  discount  offices,  the 
nature  of  the  security,  and  the  solvency  of  the  parties. 
The  form  of  contract  between  the  comptoir  and  the  Bank 
sets  forth  in  considerable  detail  the  obligations  imposed 
on  both  sides.  The  National  Bank  submits  to  the  exam- 
ination of  the  comptoir  all  the  paper  which  may  be  pre- 
sented for  discount  at  the  agency  with  which  the  comptoir 
is  connected.  The  comptoir  undertakes  to  examine  and 
appraise  such  paper  and  to  guarantee  that  the  Bank 
shall  be  subjected  to  no  loss  on  paper  discounted  through 
its  intervention.  The  comptoir  is  required  to  restrict 
the  paper  dealt  with  to  the  requirements  of  the  statutes 
of  the  Bank.  Discounts  are  granted  provisionally  by  the 
agents  of  the  Bank,  subject  to  admission  by  the  comp- 
toir. The  discount  of  a  given  piece  of  paper  becomes 
definitive  only  if  it  is  not  returned  within  one  day  by  the 
Bank.  The  Bank  has  the  right  to  suspend  or  limit  the 
operations  of  a  comptoir.  The  comptoir  admits  foreign 
drafts  only  upon  the  authority  of  the  Bank.  It  admits 
paper  of  which  one  of  the  required  signatures  comes  from 

H7 


National    Monetary     Commission 

a  member  of  the  comptoir  only  after  authorization  by 
the  Bank. 

There  is  allotted  to  the  comptoir  as  remmieration  for 
its  management  and  guarantee  a  commission  on  the 
product  of  discount,  which  is  fixed  at  one-quarter  up  to 
the  rate  of  4  per  cent;  one-eighth  upon  the  excess  of  the 
rate  above  4  per  cent  up  to  5  per  cent.  Nothing  is  allowed 
beyond  5  per  cent. 

To  relieve  the  Bank  of  clerical  expenses  and  rent  which 
it  assumes  for  the  comptoir,  the  Bank  retains  20  per  cent 
of  the  commission. 

The  comptoir  is  required  to  admit  the  agent  of  the  Bank 
to  all  its  meetings,  and  to  consider  his  observations, 
which  he  may  require  to  be  entered  in  the  records.  The 
Bank  places  its  documents  at  the  disposition  of  the 
comptoir,  but  does  not  assume  responsibility  for  them. 

Paper  admitted  by  the  comptoir  which  is  not  paid  at 
maturity,  or  which  is  sent  back  by  the  Bank,  shall  be 
immediately  reimbursed  to  the  agency  of  the  Bank. 

The  39  agencies  of  the  Bank  are  presided  over  by 
agents,  who  are  appointed  by  the  King  because  they  are 
recognized  as  responsible  for  the  administration  of  the 
public  funds  as  well  as  those  of  the  Bank.  The  Govern- 
ment has  required  the  establishment  of  agencies  where  it 
has  judged  suitable  with  reference  to  the  movement  of 
public  funds,  and  in  some  cases  where  the  Bank  has  not 
found  it  advisable  to  establish  a  discount  office.  These 
agents  are  required  to  reside  in  the  locality  where  the 
agency  is  estabhshed.  They  look  only  to  the  governor  of 
the  Bank  for  their  orders."  They  are  forbidden  to  carry 
on   any   business   foreign    to    the    management    of   their 

o  Lois  Organiques:  Statuts,  p.  103. 
118 


National      Bank       of      Belgium 

agency  and  can  not  accept  any  function  without  the 
express  authority  of  the  council  of  administration  of  the 
Bank.  They  are  divided  into  three  classes,  those  of  the 
first  class  receiving  salaries  ranging  from  12,000  to  15,000 
francs  ($2,895),  those  of  the  second  class  from  9,000  to 
12,000  francs  ($2,316),  and  those  of  the  third  class  from 
6,000  to  9,000  francs  ($1,737).  An  allotment  for  expenses 
is  made  by  the  council  of  administration  of  the  Bank. 
Every  agent  is  required  to  submit  all  his  books,  accounts, 
and  cash  and  to  give  all  desired  information  to  any  dele- 
gate of  the  central  administration  who  may  appear  with 
proper  credentials  to  make  an  inspection. 

The  business  done  by  the  comptoirs  represents  a  con- 
siderable proportion,  but  not  the  major  part,  of  the  busi- 
ness of  the  Bank.  The  30  comptoirs  are  located  at  the 
principal  towns  of  Belgium  and  practically  extend  the 
facilities  of  the  Bank  throughout  the  Kingdom.  The 
places  at  which  agencies  of  the  Bank  were  established  at 
the  close  of  1908  were  the  following,  those  where  there 
was  no  comptoir  being  in  italics : 

Agencies  of  the  National  Bank  of  Belgium. 
[Italics  denote  absence  of  a  comptoir.] 


Most. 

Hasselt. 

Philippeville. 

Arlon. 

Huy. 

Renaix. 

Ath. 

La  Louviere. 

Haulers. 

Audenarde. 

Liege. 

Saint-Nicolas. 

Boom. 

Louvain. 

Soignies. 

Bruges. 

Malines. 

Ternionde. 

Charleroi. 

Marche. 

Tirleinont. 

Courtrai. 

Mons. 

Tongres. 

Dinant. 

Namur. 

Tournai. 

Eecloo. 

Neufchateau. 

Turnliout. 

Fumes. 

Nivelles. 

Verviers. 

Gand. 

Ostcnde. 

Wavre. 

Gramraont 

Peruvvelz. 

Ypres. 

119 


National    Monetary     Commission 


The  proportion  of  business  done  through  the  comptoirs 
has  not  changed  radically  in  recent  years,  but  the  dis- 
counts granted  at  Brussels  have  declined  in  importance  in 
comparison  with  those  granted  at  the  branch  at  Antwerp. 
The  changes  in  the  ratio  of  business  done  at  the  branch  at 
Antwerp  and  at  other  offices  of  the  Bank  is  indicated  in 
the  table  below : 

Discount  at  the  branches  and  discount,  offices,  igoo,  1904,  and  igo8. 

1900. 


Source  of  discounts. 

Number  of 
biUs. 

Amount. 

Per- 
centage. 

At  comptoir'; 

1.958,478 

240, 824 

1,576.821 

Francs. 
I, 165.684,338 
442,607,931 
I, 141, 416,358 

42.  4 

16. 1 

41. S 

1904. 


At  comptoirs.. 
At  the  branch. 
At  Brussels 


2,  loi,  019 

312. 462 

1.657,535 


I. 106, 975. ISO 

677.423,  204 

1.071,037,539 


38.8 
33-7 

37-S 


At  comptoirs. . 
At  the  branch. 
At  Brussels 


2.335.878 

382,  500 

I. 708. 271 


1.340,486.  433 
957.  258,367 
758.150.488 


43-9 
31-3 
24.8 


CHANGES   IN   CAPITAL   AND   SURPLUS. 

The  original  capital  of  the  National  Bank  of  Belgium, 
as  fixed  in  the  law  of  1850,  was  25,000,000  francs  ($4,825,- 
000),  divided  into  25,000  shares  of  1,000  francs  each. 
This  was  increased  in  1872  to  50,000,000  francs.  It  was 
declared  by  the  Minister  of  Finance,  in  submitting  his 
project  for  the  renewal  of  the  charter  in  December,  1898, 


National       Bank       of      B  e  I  g  i  u  m 

that  it  did  not  seem  necessary  to  authorize  a  further  in- 
crease of  capital.  The  amount  of  real  capital  available, 
if  the  reserve  fund  were  included,  was  already  more  than 
76,000,000  francs  and  was  subject  to  annual  increments 
of  increase.  To  increase  the  legal  capital  would  be  to 
divert  from  employment  which  might  be  more  useful 
funds  upon  which,  if  they  were  thus  employed,  the  Bank 
would  be  obHged  to  earn  a  dividend.'^  It  was  pointed  out 
in  the  report  of  M.  Delbeke  that  a  bank  of  circulation  does 
not  require  so  large  a  capital  in  proportion  to  Uabilities  as 
is  required  in  banks  of  discount.  In  early  banks  of  de- 
posit the  capital  played  the  role  of  a  guaranty.  In  banks 
of  discount  also  the  capital  served  for  advances  and  was 
the  basis  for  banking  operations.  If  they  were  large,  it 
was  necessary  that  the  capital  should  also  be  large.  In- 
dustrial banks  relied  upon  their  capital  to  sustain  their 
varied  enterprises.  But  it  was  otherwise  with  a  bank  of 
issue.  Such  a  bank  does  not  discount  with  its  capital, 
but  offsets  its  discounts  by  notes  payable  on  demand. 
The  capital  is  not,  it  was  contended,  the  basis  of  the  opera- 
tions of  the  National  Bank;  it  serves  only  as  an  insurance 
fund  against  miscalculations  in  the  acceptance  of  paper 
for  discount. 

The  argument  of  the  government  on  this  subject  was 
set  forth  more  fully  in  the  report  made  to  the  Senate  by 
the  ChevaUer  Descamps.     This  report  declared:'' 

"The  share  capital  of  a  bank  of  issue  may  properly  be 
modest  without  harming  its  credit,  because  its  role  is 
secondary,  subsidiary,  and  so  to  speak  contingent.     On 

«  Documents  Parleraentaires:  igoo,  p.  9. 
6  Ibid.,  pp.  381-383. 


N  a  tio  n  al     Monetary     Commission 

the  one  hand,  the  wise  Umits  imposed  upon  the  poUcy  of 
a  bank  of  issue  exclude  from  the  scope  of  its  operations  the 
more  compromising  of  banking  operations.  On  the  other 
hand,  the  activities  of  a  bank  of  issue  do  not  have  the 
share  capital  as  the  basis  of  operations.  It  concerns  itself 
especially  with  the  exchange  of  notes  at  sight  against 
securities  of  equal  value,  quickly  convertible,  which  fill 
the  assets  of  the  bank  to  just  the  extent  that  notes  are 
issued  and  which  are  regularly  called  upon,  by  their 
graduated  maturities,  to  provide  a  succession  of  repay- 
ments. 

"  The  discount-issuing  machine  being  in  motion,  the  cap- 
ital is  called  upon  only  to  provide  eventually  for  advances 
from  the  assets,  rare  and  generally  unimportant,  for 
short  anticipations  of  maturities  and  momentary  conges- 
tions of  circulation,  which  do  not  ordinarily  occur  in  a 
sudden  manner,  which  may  be  conjured  or  modified  by 
many  measures,  which  constitute  a  serious  and  constant 
care,  rather  than  an  accident  compromising  to  the  life  of 
the  institution. 

"The  soundness  of  a  bank  of  issue  reposes  then  essen- 
tially not  upon  its  capital,  but  upon  the  quality  of  the 
securities  which  have  found  a  place  in  its  assets  as  a  coun- 
terpart of  the  notes.  Its  credit  arises  from  the  nature  of 
its  operations  and  the  prudence  of  its  administrators  in 
conforming  their  management  to  these  requirements." 

This  argument  was  carried  further  than  the  Govern- 
ment wished  in  the  discussions  in  the  chambers,  by  the 
proposal  of  Professor  Denis,  that  the  capital  should  be 
reduced  to  25,000,000  francs,  where  it  stood  in  1872,  and 
that  the  reser\^e  fund  (or  surplus)  should  be  distributed  at 


National       Bank       of      Belgium 

once  to  the  shareholders.  Future  losses,  Professor  Denis 
proposed,  should  be  met  from  an  insurance  fund,  to  be 
constituted  by  a  levy  upon  the  annual  profits  of  an 
amount  not  exceeding  three  times  the  ascertained  losses 
upon  the  average  of  the  years  1872  to  1898,  which  he 
computed  at  about  one-thirtieth  of  i  per  cent  (0.034) 
annually."  M.  Denis  denied  that  anything  in  the  risks 
involved  justified  the  doubling  of  the  capital  in  1872.  The 
impairments  of  the  portfolio  of  discounts  figured,  for  the 
entire  period  which  had  elapsed,  at  a  little  more  than 
5,000,000  francs,  or  something  like  9  to  10  centimes  per 
100  francs  of  securities  discounted.  The  profits  had  in  no 
case  suffered ;  whence  it  followed  that  the  doubling  of  the 
capital  was  not  justified  according  to  the  laws  of  1850  or 
1872  as  interpreted  by  M.  Frere-Orban  himself,  who 
assigned  to  capital  simply  the  role  of  guaranteeing  the 
Bank  against  the  impairment  of  discounts.  The  conse- 
quences of  doubling  the  capital  had  been  to  double  the 
amount  of  dividends.  From  an  average  of  3,075,000 
francs  ($593,500)  prior  to  1872  they  had  become  about 
6,000,000  francs  ($1,158,000).'' 

It  was  frankly  admitted  by  M.  Delbeke,  the  reporter 
for  the  Government,  that  a  capital  of  75,000,000  francs 
(including  reserve  funds)  was  not  indispensable,  but  he 
did  not  consider  prudent  the  reduction  of  the  amount, 
because  the  Bank  was  charged  with  the  service  of  the 
public  treasury  and  of  the  savings  banks,  and  in  these 
relations  was  the  custodian  of  several  hundreds  of  millions. 
He  opposed,  however,  the  increase  of  the  capital,  which 

o  Discussions  Parlementaires:  1900,  p.  459. 
6  Ibid.,  p.  466. 


123 


National     Monetary     Commission 

some  were  urging  in  order  to  make  the  Bank  a  more 
impressive  figure  midst  the  private  institutions  of  large 
resources  which  had  grown  up  around  it.  He  declared 
that  the  object  of  the  capital  was  to  separate  private  from 
public  credit.  It  was  necessary  that  it  be  sufficient  to 
give  to  private  interest  the  power  to  resist  the  injurious 
interference  of  the  State  and  large  enough  to  fulfill  the 
guaranties,  both  principal  and  accessory,  which  a  bank 
of  issue  took  upon  itself  in  every  country ;  but  any  increase 
beyond  these  requirements  would  lock  up  needlessly  capi- 
tal which,  if  left  at  liberty,  would  find  a  more  useful 
employment  in  the  industrial  and  commercial  activity  of 
the  country.  ° 

It  was  provided  by  the  law  of  May  5,  1850,  that  at 
least  one-third  of  the  annual  profits  in  excess  of  6  per  cent 
of  capital  should  be  employed  in  building  up  a  reserve. 
This  proportion  to  be  set  aside  from  profits  was  reduced 
by  the  law  of  May  20,  1872,  to  15  per  cent  of  the  profits 
in  excess  of  6  per  cent.  A  still  further  change  was  made 
by  the  law  of  March  26,  1900,  reducing  to  10  per  cent  of 
excess  profits  the  amount  required  to  be  covered  annually 
into  the  reserve,  but  providing  that  such  distribution 
should  begin  after  the  payment  of  a  dividend  of  4  per 
cent.'' 

These  reductions  in  the  proportion  of  profits  required 
to  be  set  aside  to  the  reserv^e  fund  were  justified,  in  the 
opinion  of  the  Belgian  lawmakers,  by  the  rapid  accumula- 
tion of  the  reserve  and  the  experience  of  the  small  demands 
which  were  made  upon  it.  The  reserve  had  risen  at  the 
close  of   1871   to   14,491,547.20  francs,  which  was  then 


o  Discussions  Parlementaires:   1900,  pp.  271-272. 
&  Documents  Parlementaires:  1900,  p.  583. 

124 


National       Bank       of      Belgium 

required  to  be  invested  exclusively  in  public  funds. 
These  funds  were  carried  at  first  at  the  purchase  price. 
A  change  was  made  during  the  year  1872  by  which  the 
appreciation  of  these  securities  was  recognized  by  calcu- 
lating them  at  the  actual  quotations  on  the  Bourse.  At 
the  end  of  1872,  with  this  change  of  valuation  and  the 
accretions  of  the  year,  the  value  of  the  reserve  fund  stood 
at  20,269,075  francs  ($3,811,400). 

It  was  accordingly  decided  that  the  increase  of  capital 
authorized  by  the  new  charter  of  1872  should  be  obtained 
to  the  amount  of  12,500,000  francs  by  transferring  this 
amount  from  the  reserve  fund  to  capital.  This  reduced 
the  reserve  by  a  corresponding  amount,  but  left  it  at  the 
end  of  1873,  with  the  profits  of  that  year,  at  7,671,842 
francs.  Further  increases  carried  the  amount  upward  by 
an  average  of  about  700,000  francs  annually  until  it  stood 
at  the  close  of  1887  at  20,199,422  francs. '^ 

The  decision  made  in  the  enactment  of  the  new  charter 
in  1900,  not  to  provide  for  any  increase  of  capital,  pre- 
vented any  radical  change  in  the  status  of  the  reserve. 
The  additional  share  given  to  the  Government  in  the  net 
earnings  in  1900  was,  however,  made  retroactive  for  the 
year  1899.  It  was  declared,  in  the  concluding  article  of 
the  law  of  March  26,  1900,  that  the  Bank  should  pay  into 
the  treasury  from  its  reserve  fund  the  amount  necessary 
to  bring  up  its  payments  for  1899  to  the  requirements  of 
the  new  law  and  that  the  amount  thus  paid  from  the 
reserve  should  be  restored  in  installments  levied  upon 
subsequent  earnings. 

In  pursuance  of  these  requirements  the  Bank  paid  over 
to  the  treasury  a  sum  of  1,487,258  francs  ($287,000),  but 

0  Noel,  Les  Banques  d'Emission  en  Europe,  I,  pp.  544-545. 
125 


N  a  tio  na  I    Monetary     Commission 

the  regular  addition  made  by  the  Bank  to  its  reser\'e  at 
the  close  of  the  year  1900  was  846,092  francs,  and  a  special 
addition  was  made  by  way  of  restitution  to  the  amount  of 
350,000  francs,  leaving  the  reserve  at  the  close  of  1900  at 
27,629,794  francs  ($5,332,000),  or  less  than  300,000  francs 
below  the  amount  at  which  it  originally  stood  at  the  close 
of  i899.« 

The  Bank  keeps  invested  in  securities  an  amount  which 
is  practically  equal  to  the  whole  of  the  capital  and  re- 
serve, but  the  entire  amount — about  85,000,000  francs 
($i6,400,ooo)^is  a  small  proportion  of  the  total  assets  of 
the  banking  department,  which  stood  on  December  31, 
1908,  at  1 ,019,461 ,475  francs  ($196,760,000) .  The  amount 
held  in  public  funds  which  is  not  set  aside  for  the  reserv^e 
is  treated  as  part  of  the  general  assets  of  the  Bank  and  is 
not  charged  distinctively  against  the  capital.  The  annual 
reports  give  in  detail  the  public  funds  held  outside  the 
reserv^e,  but  not  in  all  cases  the  composition  of  the  reserve 
itself.  The  funds  thus  held  in  both  accounts  at  the  close 
of  1900  were  classified,  at  par  value,  as  follows: 

Investments  in  public  funds. 


Class  of  funds. 


Belgian  2  yi  percents 

Belgian  3  percents: 

First  series 

Second  series 

Third  series 

Annuity  Bank  3  percents 

Annuity  Bank  4  percents 

Society  of  Communal  Credit  3  percents. 
Local  railway  guaranteed  3  percents 


General  in- 
vestments. 


Francs. 
6,  656,300 

8, 800, 200 

34, 100, 600 

6,311,  SCO 


Reserve 
fund. 


Francs. 
7.347.  500 

I. 735. 700 

I , 801 , 800 

122, 100 

641,  500 

256, 460 

17, 000, 000 

I, 095. 400 


o  Rapport:  1900,  p.  22. 
126 


National       Bank       of      Belgium 

The  general  investment  fund  kept  in  securities  has  not 
been  changed  in  character  or  amount  for  a  scries  of  years. 
While  the  reserve  fund  has  grown,  its  composition  is  dis- 
missed in  the  report  for  1908  with  the  statement  that  it 
consists  of  "Belgian  and  foreign  securities  representing  a 
capital  of  35,545,165  francs  ($6,860,000)."  The  reserv^e 
fund,  in  spite  of  deductions  for  losses  from  time  to  time 
advanced  from  20,199,422  francs  at  the  close  of  1887  to 
27,920,960  francs  at  the  close  of  1899;  31,150,684  francs 
at  the  close  of  1904;  32,203,509  francs  at  the  close  of 
1905;  33,261,375  francs  at  the  close  of  1906;  34,389,700 
francs  at  the  close  of  1907;  and  35,545,165  francs  at  the 
close  of  1908. 

EARNINGS    AND    DIVIDENDS. 

The  National  Bank  has  earned  a  fair  rate  of  profit  upon 
its  capital  since  its  foundation.  The  net  profits  above  cost 
of  operation  have  been  applied  in  part  to  the  increase  of 
the  reserve,  in  part  to  the  payment  of  taxes  and  charges  to 
the  State,  and  in  part  to  the  payment  of  dividends  to 
shareholders.  The  cost  of  administration  has  steadily 
grown,  largely  as  the  result  of  the  services  performed 
gratuitously  for  the  treasury  and  the  National  Savings 
Bank,  which  have  greatly  expanded  in  recent  years.  The 
details  of  these  financial  obligations  to  the  State  will  be 
discussed  under  a  separate  head.  How  rapid  has  been  the 
increase  in  total  operations,  in  cost  of  administration,  and 
how  heavily  the  payments  to  the  State  have  borne  upon 
the  net  earnings  remaining  for  distribution,  is  indicated 
by  the  table  following. 


127 


National     Monetary     Commission 


Earnings  and  cost  of  operation. 


Year. 

Movement  of 
operations. 

Gross 
product. 

Cost  of 
administra- 
tion. 

Net  earnings, 
after  deduct- 
ing taxes,  de- 
preciation, etc. 

1892 

Francs. 
18,  864,  409,  343 

Francs. 
10. 780. 2^0 

Francs. 
2,235,583 
2.431.  279 
3.010,323 
3.  230,098 
3.399, 153 
3.651.852 
3.941. 717 
3.887,953 
4, 026, 968 

Francs. 
6,  454,  679 

1897.. 

31,490,349,019 
32, 179. 502. 121 
36,085,  207.044 
40. 424, 814, 815 
45.034.519,641 
51. 162. 602. 291 
50,804,  771,  498 

17.585. 180 
16,662,898 
18,395.748 
18,498,899 
19.  704.409 
21, 122, 923 
20,639,024 

10,  458,  703 

II,  041,  731 

II,  375, 07s 

II,  541,  778 

11,  792,  i8r 

12,  541,  791 

12,  541,  964 

The  net  profits  and  dividends  during  the  earher  history 
of  the  Bank,  and  the  percentage  of  dividends  paid  to  the 
actual  prices  of  issue  of  the  stock,  appear  in  the  following 
table : « 

Annuul  profits  and  dividends,  1S52—188J. 


Net  profits. 


Percentage  of 
Amount  of      dividend  to 
dividend.         issue  price 
of  stock. 


1852 

1855 
i860 
1865 
1870 
1871 
1874 
1875 
1880 
i88i 
1882 
1883 
1884 
1885 
1886 
1887 


Francs. 
2. 193.566 
2,915.927 
3,765,467 
3.979.456 
4,  117,985 
6. 066, 552 
9,416,  652 
8.  213,647 
7,  182,  134 
8,551,  104 
10,047,  239 
8,727,387 
7.820.368 
7.455. 261 
7.091,  232 
7,  728,  III 


Francs. 
I. 675. 000 
2.031,  250 
2,743. 750 
2.993. 750 
3, 262, 500 
3,956, 250 
6,583. 750 
5, 980, 000 
5, 250, 000 
6, 000, 000 
6, 825, 000 
6, 100. 000 
5, 600. 000 
5, 400. 000 
5. 200, 000 
5,550,000 


6.70 
8.  125 
10.975 
11-975 
13-050 
15-825 
13- 1675 

11.  96 

10.  so 

12.  00 
13-65 
12.  20 

11.  20 
10.  80 

10.  40 

11.  10 


o  Noel,  Les  Banques  d'fimission  en  Europe,  I,  p.  542. 


128 


National       Bank       of      Belgium 

Up  to  the  renewal  of  the  charter  in  1900,  the  distribu- 
tion of  dividends  had  rarely  exceeded  6,000,000  francs 
($1,158,000).  Even  this  allotment  to  shareholders  was 
the  subject  of  severe  criticism  from  the  Socialist  benches 
in  the  Chamber  of  Deputies  and  a  merit  was  made  by  the 
Government  of  its  proposals,  by  which  a  larger  share  of 
earnings  was  to  go  into  the  public  treasury  and  the  propor- 
tion of  earnings  going  to  shareholders  was  to  be  reduced. 
There  were  protests  from  some  of  the  Socialist  members 
against  giving  the  Bank  more  than  a  fixed  interest  upon 
its  capital.  It  was  contended  by  Professor  Denis  that  the 
risk  involved  was  small  and  that  the  return  upon  the 
investment  was  excessively  large. '^  M.  Bertrand  offered 
an  amendment  guaranteeing  an  interest  of  5  per  cent 
during  the  thirty  years  of  the  proposed  new  charter,  and 
declared  that  it  was  a  very  handsome  minimum  compen- 
sation to  an  idle  capital  which  was  exposed  to  not  the 
slightest  risk.  The  surplus  of  profits,  which  had  already 
risen  above  4,000,000  francs  for  the  year  1908,  he  proposed 
should  be  paid  every  year  into  an  old  age  pension  fund  for 
laborers.''  In  response  to  these  contentions,  M.  Liebaert, 
Minister  of  Industry  and  Labor,  maintained  that  the  real 
dividend  under  the  new  charter  would  not  exceed  6.55 
per  cent  upon  the  value  of  capital  and  surplus.  He  dis- 
claimed computations  based  upon  the  market  value  of  the 
shares,  which  would  have  afforded  a  still  lower  rate  of 
return,  but  took  the  value  of  the  property  in  case  of  liqui- 
dation by  adding  the  surplus  to  the  paid-up  capital.     He 

«  Documents  Parlcmcntaires:    1900,  pp.  76-81. 
b  Discussions  Parlementaires:   1900,  p.  535. 


85519 — 10 9  129 


National     Mo  net  ary     Commission 

justified  the  continuance  of  an  elastic  dividend  rate  in  the 
following  terms :  "• 

"  I  repeat  what  I  said  last  week — is  there  any  hope,  seek- 
ing all  around  us,  of  finding  a  private  corporation  which 
would  agree  to  establish  a  bank  of  issue  under  the  condi- 
tions stipulated  by  the  pending  bill,  with  the  expectation 
of  a  return  of  6.55  per  cent?  For  my  part,  I  believe  that 
it  would  be  an  absolutely  useless  efifort,  and  this  simple 
observation  answers  everything  which  has  been  said  in 
favor  of  amendments  proposing  other  systems  of  division 
of  profits." 

While  the  growth  in  the  business  of  the  Bank  resulted 
in  higher  profits  in  later  years  than  were  generally  calcu- 
lated upon  in  the  discussion  of  1900,  the  share  of  the  State, 
including  both  special  taxes  and  division  of  profits,  ex- 
ceeded the  amount  allotted  to  shareholders  in  dividends 
by  more  than  50  per  cent  even  in  1907.  The  large  amount 
paid  into  the  treasury  at  that  time  was  derived  from  the 
excess  of  the  discount  rate  above  3^  per  cent,  all  of  which 
went  to  the  State.  The  dividends  paid  to  shareholders  in 
1907,  which  were  the  largest  ever  paid  up  to  that  date, 
were  8,300,000  francs  ($1,602,000);  the  amount  paid  into 
the  public  treasury  was  12,721,111  francs  ($2,455,000). 
How  these  dividends  have  increased  in  recent  years,  in 
spite  of  the  large  proportion  of  earnings  taken  by  the  State, 
appears  in  the  following  table: 

o  Discussions  Parlementaires:   1900,  p.  544. 


130 


National       Bank       of      Belgium 


Dividends  distributed,  i8g2-igo8. 


Amount  of 
dividend. 


Rate  per 
share. 


1892 
1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 
1905 
1906 
1907 
1908 


Francs. 

4,  850,  000 

5,  450*  000 
5.500,000 

6,  050,  000 

7,  050,  000 
7,  300,  000 
7, 400, 000 
7,  500,  000 
7, 600, 000 

7,  700,  000 
7, 650, 000 

8,  300,  000 
8, 300, 000 


Per  cent. 

9-  70 

10.  90 

11.  00 

12.  10 
14.  10 
14.  60 
14.  80 
15-00 
15-  20 
15.40 
IS-  70 
16.  60 
16.  60 


SHARE   OF  THE  STATE  IN  THE   PROFITS  OF  THE  BANK. 

The  proportion  of  the  earnings  of  the  National  Bank  of 
Belgium  taken  by  the  Government  is  large,  but  not  larger 
than  at  som.e  other  European  banks  under  the  latest  re- 
visions of  their  charters.  As  the  provisions  of  the  charter 
on  this  subject  are  somewhat  intricate  it  may  afford  a  view 
of  their  general  scope,  before  taking  them  up  in  detail,  to 
give  the  summary  made  by  the  present  writer  elsewhere  i** 

"Under  the  extension  of  the  charter  in  1872  the  Bank 
was  required  to  pay  a  patent  tax  on  the  gross  volume  of 
business,  a  stamp  tax  on  its  notes,  and  a  tax  of  one-quarter 
of  I  per  cent  semiannually  on  the  excess  of  the  circulation 
above  275,000,000  francs.  These  provisions  were  con- 
tinued by  the  law  of  March  26,  1900.  The  other  principal 
taxes  levied  by  the  law  of  1872  were  one-quarter  of  the 
net  profits  of  the  bank  above  6  per  cent  and  on  discounts 


o History  of  Modern  Banks  of  Issue:   1909,  p.  284. 


131 


National     M o  7j  c  t  a?' y     Com  m  i s  s  i o  n 

the  entire  excess  of  receipts  above  a  rate  of  5  per  cent." 
These  two  Umits  were  radically  changed  in  1900.  Hence- 
forth one-quarter  of  the  profits  was  to  go  to  the  State  after 
4  per  cent  had  been  distributed  to  the  shareholders  and 
all  profits  obtained  from  a  discount  rate  above  3^2  per  cent 
were  to  find  their  way  into  the  public  treasury."*" 

These  taxes  were  the  subject  of  careful  discussion  by 
the  Government  in  presenting  the  project  for  the  renewal 
of  the  charter  in  1898,  because  it  was  anticipated  that  they 
would  be  attacked  by  the  Socialist  members  of  the  cham- 
bers. In  the  statement  of  reasons  for  the  government 
project  submitted  by  the  Minister  of  Finance  the  right 
of  the  State  to  impose  a  special  tax  upon  the  earnings  of 
the  Bank  was  based  upon  the  argument  that  "the  profits 
of  the  bank  are  derived  solely  from  the  privilege  granted 
to  it  of  issuing  notes  which  are  received  in  the  offices  of 
the  Treasury."  Discussing  the  best  means  of  levying  the 
share  of  the  State,  the  minister  continued  as  follows : " 

"To  levy  directly  upon  the  profits  resulting  from  issue 
would  appear  at  first  to  be  the  most  rational  system.  It 
is  the  principle  by  virtue  of  which  the  State,  after  a  prelimi- 
nary allotment  to  the  share  capital,  assumes  for  itself  a 
portion  of  the  net  profit  of  the  Bank.  Would  it  not  be 
suitable  either  to  increase  this  proportion  or  to  collect  a 
share  in  the  gross  profits  on  productive  operations,  saving 
the  right  to  abandon  the  benefits  of  half  of  i  per  cent  on  the 
credit  circulation  exceeding  275,000,000  francs? 

"A  profound  examination  led  the  Government  to  recog- 
nize that  if,  on  the  one  hand,  the  reform  should  result  in  the 

a  Noel,  I,  p.  563. 

b  Bulletin  de  Statistique,  April,  1900,  XLVII,  p.  422. 

c  Documents  Parlementaires:   1900,  p.  16. 

132 


National       Bank       of      Belgium 


abolition  of  a  combination  whose  conception  is  more  or  less 
tainted  with  empiricism,  it  would  result,  on  the  other  hand, 
according  to  every  probability,  in  a  considerable  reduction 
of  the  receipts  of  the  State  in  the  future.  It  is  sufficient  to 
cast  a  glance  over  the  following  table  to  note  that  the 
profits  of  the  Bank,  far  from  following  the  regular  ascend- 
ing course  of  the  circulation  and  of  the  tax  of  one-half  of  i 
per  cent,  scarcely  maintain  themselves: 

"Proceeds  of  tax  on  circulation. 


Year. 


890 
891 
892 
893 
894 
895 
896 
897 


Net  profits. 


Francs. 
7,4SS.oi8 
8,183,073 
8, 090, 981 
7,363,962 
6,454,697 
6,454,695 
6,454,688 
6,  182,  132 
7, 000, 418 
7. 545. 720 


Average 
amount  of  cir- 
culation. 


Francs. 
361, 030, 000 
363, 258,910 
382, 509, 680 
391,  080,  660 
405,862,  150 
411, 887, 150 
429.358,450 
450.413.  100 
451,  708,950 
476,654,470 


Increase  over 
previous  year. 


Francs. 


2,  228,  910 
19,050,  770 

8,  770, 980 
14,  781, 490 

6,  025,  000 
17.471.300 
21.054,  650 

I,  295.850 
24. 945. 520 


Amount  of 
tax  on  ex- 
cess circula- 
tion. 


Francs. 
413, 000 
418, 961 
518,138 
555,977 
633.  no 
660, 664 
748.739 
851. 173 
858.354 
977.967 


A  further  table,  submitted  by  the  minister  upon  the  es- 
timated increase  in  circulation  of  the  ten  years  ending  with 
1908,  showed  a  steady  increase  in  the  amount  of  the  circu- 
lation with  a  corresponding  increase  in  the  tax  collected. 
The  estimated  increase  was  from  an  average  of  486,000,000 
francs  in  1898  to  611,000,000  francs  in  1908.  This  esti- 
mate has  been  exceeded  by  the  actual  movement  of  the 
circulation.  Commenting  upon  these  estimates,  the  Min- 
ister of  Finance  declared  that  the  maintenance  of  the 
clause  imposing  a  duty  upon  the  circulation  was  eminently 
favorable  to  the  State,  because  it  guaranteed  to  the  treas- 

133 


National     Mo  net  ary     Commission 

uty  a  sure  return,  whatever  might  be  the  net  profits  real- 
ized by  the  Bank.  "However  reduced  those  profits  may- 
be," he  declared,  "it  none  the  less  remains  true  that  the 
privilege  of  issue  constitutes  a  source  of  profit  to  the 
Bank." 

Turning  to  the  important  provision  allotting  a  share  in 
the  net  profits  of  the  Bank  to  the  Government,  the  min- 
ister declared  that  if  it  was  just  that  in  return  for  the 
privilege  of  note  issue  the  State  should  obtain  a  share  in 
the  profits,  it  was  also  equitable  to  leave  to  the  share- 
holders a  revenue  in  proper  proportion  to  the  employment 
of  their  money  and  to  the  services  which  the  Bank  was 
called  upon  to  render.  By  the  law  of  1850  the  allotment 
of  dividends  to  the  shareholders,  before  the  participation 
of  the  State  in  the  profits,  was  6  per  cent,  and  the  amount 
of  the  participation  of  the  State  above  this  dividend  was 
one-sixth.  As  pointed  out  in  the  Senate  report  of  the 
Chevalier  Descamps,  the  lightness  of  the  tax  was  based 
upon  the  fact  that  the  future  of  the  institution  was  not 
yet  firmly  estabhshed.  By  the  law  of  1872  the  Hmit  of 
the  dividend  allotted  to  the  shareholders  before  the  par- 
ticipation of  the  State  was  left  at  6  per  cent.  The  share 
of  the  State  above  that  amount,  however,  was  increased 
from  one-sixth  to  one-quarter.  This  increase  was  con- 
sidered in  a  measure  as  a  compensation  to  the  treasury 
for  the  fact  that  the  increase  of  the  capital  from  25,000,000 
francs  to  50,000,000  francs  would  require  a  larger  amount 
for  dividends  to  the  shareholders  and  would  therefore 
reduce  the  amount  from  which  the  share  of  the  State 
would  be  derived.  With  a  capital  of  25,000,000  francs, 
the  sum  of  1,500,000  francs  would  be  required  for  a  divi- 


134 


National       Bank       of      Belgium 

dend  of  6  per  cent,  while  with  the  enlarged  capital  the 
dividend  would  require  3,000,000  francs. 

A  much  more  radical  proposal  was  brought  forward  by 
the  Government  in  1898.  This  was  in  effect  that  the 
dividend  allotted  to  the  shareholders  before  division 
with  the  State  should  be  reduced  from  6  per  cent  to  4  per 
cent.  The  essential  reason  assigned  by  the  Minister  of 
Finance  for  this  change,  was  the  decUne  which  had 
occurred  since  1872  in  the  rate  for  the  loan  of  capital.  It 
was  declared  in  the  Senate  report  that  the  grant  made  to 
the  State  of  an  increased  share  in  the  profits  was  the  more 
remarkable,  as  the  general  dividends  of  the  shareholders 
of  the  Bank  were  inferior  to  the  average  of  dividends 
declared  in  similar  industries  in  the  country.  "It  is  not 
without  interest  to  recall,"  declared  the  report,  "that  the 
actual  quotations  of  the  shares  of  the  Bank  are  very  near 
the  level  of  those  of  1872,  while  from  1850  to  1872  there 
was  a  considerable  advance."  The  total  allotments  to 
the  State  under  this  clause,  from  the  beginning  of  1873  to 
the  close  of  1899,  were  31,104,864  francs,  which  afforded 
an  annual  average  of  1,152,032  francs  ($223,000).'* 

The  third  important  burden  imposed  upon  the  profits 
of  the  Bank  is  the  requirement  that  the  entire  excess  of 
profits  derived  from  a  discount  rate  above  a  fixed  figure 
shall  be  paid  into  the  public  treasury.  In  this  respect, 
as  in  the  distribution  of  net  profits,  the  law  of  1900  was 
more  exacting  than  prior  laws.  A  law  of  May  5,  1865, 
had  provided  that  there  should  be  paid  into  the  public 
treasury  the  amount  of  the  difference  between  the  discount 
rate  collected  by  the  Bank  and  the  legal  rate,  which  was 

o  Documents  Parlementaires:  igcxj,  p.  390. 
135 


National     Monetary     Commission 

then  fixed  at  6  per  cent.  The  general  law  of  December  20, 
1890,  changed  this  legal  rate  to  4K  per  cent  in  civil  matters 
and  5^  per  cent  in  commercial  matters. '^ 

The  law  of  1872,  renewing  the  charter,  reduced  the 
rate  of  discount  beyond  which  all  profits  should  be  covered 
into  the  public  treasury  to  5  per  cent.  It  was  not  without 
resistance  that  the  Government  prevented  at  that  time 
the  anticipation  of  the  later  reduction  of  1 900  to  3  X  per 
cent.  An  amendment  was  offered  by  M.  Balisaux,  pro- 
posing that  profits  resulting  from  an  excess  of  the  rate  of 
discount  above  4^/4  per  cent  should  be  paid  into  the  public 
treasury  and  that  the  Government  should  be  left  free  to 
reduce  the  limit  still  further  by  authority  of  law,  at  the 
rate  of  half  of  i  per  cent  at  the  expiration  of  five-year 
periods,  until  the  minimum  of  3X  per  cent  was  reached,* 
If  such  a  law  had  become  immediately  effective,  the 
limit  would  have  fallen  to  4  per  cent  in  1878  and  to  3^^  per 
cent  in  1883.  The  proposal  of  M.  Balisaux  was  rejected 
with  a  vote  of  only  10  in  the  affirmative  to  62  in  the 
negative,  leaving  the  mirumum  rate  which  he  advocated 
to  be  considered  again  at  the  renewal  of  the  charter  in 
1900."^ 

The  rates  for  circulating  capital  in  Europe  were  so  low, 
except  at  periods  of  special  stress,  that  there  were  only 
six  years  from  1873  to  1897  in  which  the  discount  rate  of 
the  National  Bank  was  at  any  time  above  5  per  cent. 
The  largest  amount  collected  under  this  tax  was  in  the 
year  immediately  following  the  renewal  of  the  charter, 
when  the  crisis  of  1873  caused  pressure  in  the  international 

o  Documents  Parlementaires:   1900,  p.  393. 
&  Documents  Officiels-   1872,  p.  171 
c  Ibid.,  p.  434. 

136 


National       Bank       of      Belgium 

money  market.  The  amount  then  paid  into  the  pubHc 
treasur}^  under  this  clause  was  1,336,338.80  francs,  which 
was  more  than  the  entire  amount  coUected  in  each  of  the 
other  five  years  before  the  rate  at  which  the  treasury 
became  a  participant  was  changed.  The  amount  thus  paid 
into  the  treasury  in  1874  was  340,834.62  francs;  in  1881, 
268,302.77  francs;  in  1882,  164,017.16  francs;  in  1888, 
83,218.72  francs;  in  1889,  18,484.13  francs;  and  in  1899, 
118,986.72  francs.  The  total  of  these  payments  for  all 
the  years  under  the  operation  of  the  charter  of  1872  was 
2,330,182.92  francs  ($450,000).'^ 

The  change  proposed  by  the  minister  and  adopted  in 
1900  was  based  in  a  considerable  measure  on  the  low  rates 
for  the  use  of  money  which  prevailed  dtu-ing  the  closing 
decade  of  the  nineteenth  century.  It  was  declared  in  the 
report  of  the  Minister  of  Finance  that  "this  measure  is 
imposed  by  the  reduction  in  the  rate  for  money  if  the 
intentions  of  the  legislators  of  1872  are  to  continue  to  be 
realized. ' '  The  motives  of  the  change  were  set  forth  some- 
what more  fully  by  Senator  Descamps,  who  declared  that 
when  the  discount  rate  was  raised  to  an  abnormal  figure 
it  was  important  that  the  action  of  the  Bank  should  be 
free  from  suspicion.  He  added  that  "the  significance  of 
the  provision  could  not  escape  anyone  and  would  be 
received,  especially  by  commerce,  with  marked  satisfac- 
tion, as  a  pledge  of  the  firm  determination  of  the  Bank  to 
do  all  which  lay  in  its  power  to  maintain  discount  at 
favorable  rates  while  it  was  practicable,  even  at  the  price 
of  considerable  sacrifices. ' ' '' 

o  Documents  Parlementaires:   1900,  p.  534. 
6  Ibid.,  p   393. 


137 


National     Monetary     Commission 

Changes  in  the  condition  of  the  international  money 
market  made  collections  on  account  of  the  excess  discount 
rate  much  larger  than  was  anticipated.  For  the  nine 
years  prior  to  1899,  just  before  the  new  charter  was  voted, 
the  discount  rate  had  never  risen  above  4  per  cent  and 
had  been,  except  for  a  total  of  eighty-six  days,  continu- 
ously at  3  per  cent  or  less.  The  growing  stringency  in 
the  money  markets  resulted,  however,  in  a  rate  of  4  per 
cent  or  higher  during  the  entire  year  1900,  and  the  collec- 
tion of  excess  discount  taxes  to  the  amount  of  2,254,663 
francs  ($435,000).  The  Government  received  nothing 
from  this  source  during  the  years  1902  and  1904,  and 
only  388,115  francs  in  1901,  and  264,505  francs  in  1903. 
The  year  1905,  however,  witnessed  such  pressure  in  the 
money  market  that  the  proceeds  of  the  excess  discount 
rate  paid  into  the  public  treasury  were  471,269  francs; 
which  rose  in  1906  to  2,025,989  francs,  and  in  1907  to 
7,002,541  francs,  which  was  supplemented  during  the  early 
part  of  1908  by  collections  of  1,258,706  francs.  The  total 
collections  during  the  nine  years  ending  with  1908  were 
13,665,788  francs  ($2,635,000). 

While  the  measures  of  the  Government  as  set  forth 
above  were  adopted  in  the  renewal  of  the  charter  in  1900, 
they  were  not  acceptable  in  principle  or  in  detail  to 
the  SociaUst  minority  of  the  chambers.  M.  Denis  de- 
clared, in  opening  the  discussion  of  the  subject  in  his 
report,  that  the  profits  of  the  National  Bank  had  not 
obeyed  the  historical  law  by  which  interest  and  profits 
tend  to  fall — a  law  which  was  evidenced  by  the  course  of 
pubHc  fvmds  and  the  investments  of  the  savings  bank.'' 

«  Documents  Parlementaires :  1900,  p.  76. 
138 


National      Bank       of      Belgium 

He  sought  to  demonstrate  this  by  a  table  showing  that 
the  dividends  paid  per  loo  francs  by  the  Bank,  while  they 
had  not  been  constant,  were  above  lo  per  cent  in  1897, 
and  had  been  lower  than  this  as  far  back  as  1876  and  only 
occasionally  higher,  while  the  rate  of  return  on  the 
investments  of  the  savings  bank  had  shown  an  almost 
tininterrupted  tendency  to  fall.  His  figures  for  repre- 
sentative years  are  as  follows: 

Interest  rates  and  dividends  of  the  Bank. 


Year 


1874 
1875. 
1877 
1880 
1882 
1885, 
1890 
1892 
1895 
1897. 


Rate  on 

savings- 
bank 
investments 


Per  cent 
4.  20 
4.  27 
4.07 
4-  17 
4.  00 
3  90 
3.48 
3-47 
3-  29 
3-  29 


Bank 
dividend 
per  100 
francs. 


14-  25 

11.38 

8.55 

10.  00 

1300 

10.  28 

10.  95 

9.  23 

8.95 

10.38 


M,  Denis  pointed  out  that  if  the  Bank  suffered  some 
reduction  of  profits  from  the  decline  of  discount  rates  in 
Belgium,  it  was  compensated  in  a  large  measure  by  the 
increase  in  the  proportion  of  foreign  bills  which  had 
taken  the  place  of  coin  in  the  reserve.  He  submitted 
figures  showing  that,  while  the  metallic  reserve  had  re- 
mained substantially  constant  over  a  period  of  twenty 
years,  from  the  close  of  1877  to  the  close  of  1897,  the  hold- 
ings of  foreign  bills  had  almost  uniformly  increased, 
except  on  a  few  occasions  wheH  they  were  being  put  to 
use  to  strengthen  the  position  of  the  Bank.     The  profit 


139 


National     Monetary     Commission 


derived  from  the  discount  of  Belgian  paper  had  not 
increased  in  amount  materially,  in  spite  of  increase  in 
volume,  but  there  had  been  a  marked  increase  in  the 
profit  derived  from  the  holding  of  foreign  bills.  Figures 
for  representative  years  from  his  table  are  as  follows: 

Earnings  from  discounts. 


December  3 1- 


Metallic 
reserve. 


Francs. 

1877 I      100,  300,  000 

1880 '        97,  500.  000 

1885 '      104,  300,  000 

1890 10 I, 600, 000 

189s --- 

1896 

1897 


Foreign 
bills  held. 


99. 900, 000 
100, 700, 000 
103, 000, 000 


Francs. 

SO, 400, 000 

S5,  700,000 

74, 800, 000 

74, 500, 000 

107,  400,  000 

loi, 700, 000 

120, 400, 000 


Earnings  on 

Belgian 

bills. 


Francs, 
S.387,  194 
5. 873, 713 
5,878,830 
6,  743,534 
5, 158, 199 
5,884,419 
6,884,816 


Earnings  on 

foreign 

biUs. 


Francs. 
1,363, 100 
I, 240, 263 
1,431.033 
2,321,  727 
1,656,651 
2, 116, 807 
2,  510,093 


Professor  Denis  rejected  entirely  the  basis  of  calculation 
adopted  by  the  Government  in  the  division  of  profits  be- 
tween the  Bank  and  the  State.  He  declared  that  a  con- 
ception of  the  subject  based  upon  principle  was  entirely 
lacking  in  the  government  plan,  and  that  the  tax  on  circu- 
lation and  the  division  of  profits  were  two  proposals  of  an 
entirely  different  character,  having  no  organic  relation 
with  each  other.  He  inquired  if  there  was  not  a  danger 
in  interesting  the  State  in  an  issue  of  bank  bills  without 
limit,  in  the  situation  and  with  the  tendencies  which  actu- 
ally prevailed?  He  suggested  that  the  true  basis  of  a 
division  of  profits  was  the  relation  which  was  borne  by 
the  part  contributed  by  the  Government  and  the  public 
on  the  one  hand  to  the  actual  capital  and  reserve  belonging 
to  the  shareholders  on  ^he  other.  Starting  from  this 
premise,  he  computed  the  current  accounts  and  the  excess 


140 


National       Bank       of      Belgium 

of  circulation  above  the  reserve  at  487,000,000  francs. 
This  amount  bore  to  the  80,000,000  francs  of  capital,  re- 
serve, and  dividends  of  the  Bank  a  relation  of  86  to  14. 
He  proposed  to  allot  a  minimum  interest  of  4  per  cent 
to  capital  and  reserve  and  to  add  200,000  francs  as  a 
premium  against  losses  on  commercial  paper.  Upon  this 
basis  the  total  profits  during  1897  of  8,421,401  francs 
would,  after  the  dividend  allotment  to  shareholders  of 
4  per  cent  and  the  premium  against  risks,  amounting 
to  3,200,000  francs,  leave  a  surplus  of  5,221,401  francs. 
Under  his  proposed  system  of  division  the  allotment  of 
14  per  cent  to  the  shareholders  would  give  them  730,996 
francs,  or  a  total  (with  the  dividend)  of  3,930,996  francs 
($759,000),  while  the  86  per  cent  of  the  surplus  profits 
assigned  to  the  State  would  carry  its  proportion  to  4,490,- 
405  francs  ($867,000),  instead  of  the  allotment  of  2,289,397 
francs  ($442,000)  given  by  the  proposed  law.'^ 

The  stamp  tax  paid  upon  notes  was  originally  collected 
under  a  general  law  which  required  each  note  before 
being  issued  to  pay  a  tax  of  5  centimes  per  100  francs 
(about  I  cent  for  $20) .  This  provision,  proving  cumber- 
some in  practice,  was  superseded  by  the  law  of  September 
10,  1862,  which  took  efifect  on  October  i  of  that  year. 
This  law  provided  for  the  payment  of  the  tax  at  the  end 
of  each  year  at  the  same  rate  (50  centimes  per  1,000 
francs)  upon  the  average  of  the  notes  actually  in  circula- 
tion during  the  year.  This  made  the  tax  an  annual  one 
upon  the  entire  issue,  instead  of  a  specific  tax  upon  each 
note,  without  regard  to  the  term  of  its  circulation.  To 
offset  the  increase  in  the  burden  thus  imposed  upon  the 

o  Documents  Parlementaires :   1900,  p.  81. 
141 


National    Monetary     Commission 

bank,  it  was  provided  that  for  the  first  five  years  under 
the  new  regime  there  should  be  deducted  from  the  tax 
one-fifth  of  the  amount  collected  during  the  five  previous 
years. 

The  average  paid  under  this  provision  down  to  the 
discussion  over  the  renewal  of  the  charter  in  1872,  was 
83,888.20  francs  ($16,200).  In  view  of  these  figures,  it 
was  proposed  at  that  time  by  M.  Malou,  the  Minister  of 
Finance,  to  compound  with  the  Bank  for  an  annual  pay- 
ment of  84,000  francs  a  year  for  ten  years  from  January  i, 
1873.  I'h^  proposal  of  this  fixed  Hmit,  over  a  period 
likely  to  be  marked  by  an  upward  movement  in  the  circu- 
lation, was  considered  as  a  partial  compensation  to  the 
Bank  for  the  abandonment  of  the  proceeds  of  discount 
above  5  per  cent.  It  was  declared  that  in  enjoying  by 
degrees  the  diminution  of  the  tax  on  notes,  the  Bank  was 
morally  obHgated  to  incur  the  expense  necessary  to  renew 
the  notes  more  frequently  when  they  came  in  somewhat 
worn,  if  even  it  should  not  be  able  at  some  time,  like  the 
Bank  of  England,  to  replace  every  bill  received  by  an 
entirely  new  one.  The  committee,  however,  decided  in 
favor  of  continuing  the  system  oi  a  tax  of  50  centimes  per 
1,000  francs  on  the  average  of  the  actual  circulation,  and 
this  provision  ultimately  prevail czd.**  The  amount  en- 
tered in  the  profit  and  loss  account  for  1907  on  account 
of  the  stamp  tax  was  371,702.37  francs  ($71,750). 

SERVICES  PERFORMED  BY  THE  BANK  FOR  THE  STATE. 

One  of  the  chief  purposes  of  the  creation  of  the  National 
Bank  of  Belgium  was  to  afford  a  safe  and  sympathetic 

oNoel,  I.,  p.  528-529. 

142 


National      Bank       of      Belgium 

organ  to  the  Government  for  carrying  on  the  fiscal 
operations  of  the  Treasury.  The  original  charter  con- 
tained the  following  simple  provisions  on  this  subject: 

"Article  X. 

"The  Bank  shall  act  as  cashier  for  the  State  under 
conditions  to  be  determined  by  law. 

"Article  XI. 

"  If  a  savings  bank  shall  be  established,  the  Government 
reserves  the  right  to  have  it  managed  by  the  Bank. 
This  service  shall  be  distinct  and  independent  from  the 
business  of  the  Bank  and  its  organization  shall  be  the 
subject  of  a  law." 

The  act  passed  in  conformity  with  the  first  of  these 
provisions  became  law  only  five  days  after  the  adoption 
of  the  charter  of  the  new  bank.  It  was  brief  and  general 
in  character,  containing  only  nine  articles  and  leaving 
details  to  be  incorporated  in  the  statutes  of  the  Bank  by 
agreement  between  the  Bank  and  the  Government.  The 
first  article  simply  confided  to  the  Bank  the  service  of 
cashier  for  the  State  and  subjected  the  Bank  to  the  super- 
vision of  the  court  of  accounts,  which  the  Soci^te  G^nerale 
had  resisted.  It  was  provided  that  the  Bank  should 
establish  an  agency  in  the  chief  town  of  every  judicial 
district  and  in  additional  localities  where  the  Government 
should  consider  it  necessary  in  the  interest  of  the  treasury 
and  of  the  public.  The  agents  of  the  Bank  are  named 
by  the  King  from  a  double  list  of  candidates  presented 
by  the  administrative  council  of  the  Bank.  They  are 
required  to  furnish  bonds  in  the  form  of  real  estate  or 

»43 


National     Monetary     Commission 

public  funds,  but  are  paid  entirely  by  the  Bank."  The 
books  relating  to  the  treasury  service  are  kept  by  methods 
prescribed  by  the  Government  and  are  subject  to  inspec- 
tion by  representatives  of  the  Ministry  of  Finance.  Two 
important  provisions  regarding  the  administration  of 
the  public  funds  by  the  Bank  are  set  forth  in  the  con- 
solidation of  various  laws  proclaimed  by  King  Leopold 
on  August  7,  1900,  embodying  the  changes  made  by  the 
law  of  March  26,  1900,  extending  the  charter.  These 
provisions  are  as  follows: 

"Article  VII. 

"The  National  Bank  shall  perform  gratuitously  the 
service  of  cashier  for  the  State.  The  Bank  shall  bear  all 
expenses  of  management,  of  material,  of  transportation, 
and  of  transfer  of  funds,  and  shall  share  in  the  expenses 
of  the  treasury  in  the  provinces  to  an  amount  of  230,000 
francs  annually.  This  amount  shall  not  be  increased  at 
the  revision  of  the  convention  provided  for  by  Article  IX 
of  this  act. 

"The  available  funds  of  the  treasury  in  excess  of  the 
requirements  of  the  service  shall  be  invested  by  the  Bank 
in  commercial  securities.  The  Bank  shall  be  guarantor 
for  the  securities  acquired  or  set  aside  for  account  of  the 
treasury." 

The  ninth  and  last  article,  above  referred  to,  provides 
that  the  convention  between  the  Government  and  the 
Bank  shall  be  subject  to  revision  every  ten  years. 

The  first  arrangement  between  the  Bank  and  the  Gov- 
ernment allotted  to  the  Bank  for  its  services  a  compen- 

a  Ulens,  Les  Banques  d'Emission,  p.  364 
144 


National      Bank       of      Belgium 

sation  which  should  not  exceed  200,000  francs  per  year 
and  from  which  it  must  meet  all  expenses  of  management, 
material,  transportation,  and  transfer  of  funds.  It  was 
not  until  the  eve  of  the  renewal  of  the  charter  in  1872 
that  it  was  provided  that  this  service  should  not  only  be 
performed  gratuitously,  but  that  the  Bank  should  bear 
a  share  of  the  cost  of  the  treasury  service  in  the  provinces 
to  an  annual  amount  of  1 75,000  francs  ($33,775) .  Already, 
during  the  negotiations  for  the  new  charter,  a  new  con- 
vention was  concluded  between  the  Minister  of  Finance 
and  the  Bank  on  November  30,  1870,  which  provided 
that  from  January  i,  1871,  to  December  31,  1875,  the 
change  above  referred  to  should  be  made.  The  minister 
based  his  demand  for  this  concession  upon  the  advantages 
which  the  Bank  had  derived  from  the  increase  in  the 
treasury  balance.  The  Bank  thought  proper  to  submit 
to  this  new  obligation  ' '  in  order  to  maintain  the  har- 
monious relations  which  had  always  existed  between 
itself  and  the  Government. ' '  '^ 

The  law  of  May  20,  1872,  sanctioned  this  change  and 
provided  that  the  payment  of  175,000  francs  should  not 
be  increased  so  long  as  the  Bank  should  be  charged  with 
the  functions  of  cashier.  A  later  law  of  July  17,  1872, 
required  that  in  all  localities  where  an  agency  of  the  Bank 
should  be  established  there  should  also  be  an  agency  of 
the  treasury,  specially  charged  with  the  control  of  receipts 
and  expenditures.  A  further  increase  was  made  at  the 
renewal  of  the  charter  in  1900  in  the  amount  contributed 
by  the  Bank  toward  the  expenses  of  treasury  adminis- 
tration, carrying  the  amount  to  230,000  francs  ($44,400). 

a  Noel,  Banqucs  d'fimission  en  Europe,  I,  p.  551. 
85519—10 10  145 


National    Monetary     Commission 

Under  the  authority  of  these  provisions  the  Bank  re- 
ceives payments  and  makes  disbursements  on  account  of 
the  Government  at  all  its  agencies.  It  is  charged  with  the 
custody  of  the  public  funds  of  the  treasury,  of  the  sinking 
fund,  and  of  the  deposit  and  consignation  fund,  and  with 
the  ser\dces  which  are  connected  therewith.  It  is  also 
charged  with  the  receipt  of  securities  of  the  public  debt 
destined  to  be  registered  or  converted  into  securities  to 
bearer.  It  collects  the  coupons  of  securities  of  which  it 
has  the  custody  for  different  state  funds  and  carries  the 
proceeds  to  the  proper  account. 

Payments  are  made  by  the  representatives  of  the  Treas- 
wry  in  the  Bank  only  with  the  approval  of  a  treasury 
agent,  who  countersigns  the  receipts  of  all  collections 
effected  by  the  agent  of  the  Bank  and  who  alone  has  the 
responsibility  of  all  payments  made  by  the  Bank.  The 
latter  is  not  responsible  for  the  standing  of  the  claims. 
The  indorsement,  "noted,  payment  approved"  (vu,  bon 
k  payer),  affixed  by  the  agent  of  the  treasiuy,  protects 
the  Bank  completely  and  transforms  individual  drafts  into 
paper  payable  to  bearer.^ 

A  ministerial  order  of  October  20,  1868,  modifying  the 
order  of  December  5,  1850,  directed  the  agents  of  the 
treasury  to  assign  to  the  offices  of  the  National  Bank  pay- 
ments in  the  following  cases: 

"  I.  Expenses  of  the  State,  including  fixed  expenditures, 
expenditures  submitted  to  preliminary  liquidation,  and  ex- 
penditures based  upon  open  credits; 

"2.  Special  expenses  of  the  State — that  is,  expenses  re- 
lating to  the  special  funds  for  pensions  and  saving  (pre- 

oNoel,  I,  p.  553. 

146 


National      Bank       of      Belgium 

voyance),  disbursements  from  provincial  and  from  local 
funds ; 

"3.  To  note  the  payments  made  into  the  hands  of  the 
agents  of  the  Bank  in  its  capacity  as  cashier  of  the  State." 

The  agents  of  the  treasury  can  make  drafts  upon  the 
agents  of  the  Bank  only  by  virtue  of  authorizations  ema- 
nating from  the  Department  of  Finance,  except  in  the  case 
of  drafts  (mandats)  issued  by  the  administrators  of  the 
savings  bank  of  primary  teachers.  The  Minister  of  Fi- 
nance advises  the  Bank  of  the  opening  of  credits  on  the 
public  treasury  and  indicates  the  localities  in  which  such 
payments  may  be  effected.  He  informs  the  Bank  of  the 
issue  of  orders  for  the  return  of  securities  deposited  in  its 
custody.  Such  a  notice  is  not  required  for  securities  which 
belong  to  the  sinking  fund  or  to  the  Bank  of  Deposits  and 
Consignations.  The  coupons  of  public  loans  are  payable 
at  all  agencies  of  the  Bank  without  the  opening  of  a  credit. 

On  the  loth  and  25th  of  each  month  the  administration 
of  the  Bank  addresses  to  the  Minister  of  Finance  an  ac- 
count of  receipts  and  disbursements  up  to  the  expiration 
of  the  previous  half  month  and  also  an  account  of  the 
obligations  of  the  public  debt  and  other  securities  received 
and  delivered.  In  the  month  of  January  the  Bank  sub- 
mits in  triplicate  to  the  court  of  accounts  through  the  in- 
termediary of  the  Minister  of  Finance  the  account  of  its 
operations  on  behalf  of  the  treasury  during  the  preceding 
year.  This  account  is  divided  into  two  parts,  of  which 
one  sets  forth  by  agencies  the  operations  in  money  and 
the  other  the  operations  in  securities. 

The  agents  of  the  Bank  meet  the  general  expenses  of  the 
State  and  the  provinces  upon  warrants  signed  by  the  agent 

147 


National     Monetary     Commission 

of  the  treasury  in  the  proper  district  to  the  amount  of 
the  credits  opened  by  the  Minister  of  Finance  or  in  his 
name,  of  which  the  Bank  is  previously  advised.  Pay- 
ment is  made  without  the  intervention  of  the  agent  of  the 
treasury,  but  only  after  previous  advice  either  of  the  issue 
of  drafts,  the  opening  of  credits,  drafts  to  order  dehvered 
by  the  minister,  drafts  to  bearer  delivered  by  the  treasury, 
credits  which  are  opened  by  the  service  of  the  sinking 
fund  and  the  Bank  of  Deposits  and  Consignations,  and, 
finally,  interest  coupons  of  the  public  debt  and  other  se- 
curities to  bearer  representing  interest  payments. 

The  agents  of  the  Bank  keep  a  separate  account  of  their 
operations  for  the  service  of  the  Government.  They  keep 
for  this  purpose  a  journal  of  receipts,  a  journal  of  dis- 
bursements, a  ledger,  and  a  record  of  funds  held  at  the 
disposition  of  the  agent  of  the  treasury.  Copies  or  ex- 
tracts from  these  books  are  sent  \^■eekly  or  monthly  to  the 
agent  of  the  treasury.  There  is  also  remitted  to  the  agent 
of  the  treasury  a  list  in  duplicate  of  obligations  paid 
upon  his  signature  on  the  morrow  on  the  day  of  payment. 
A  copy  of  this  list,  indorsed  with  an  acknowledgment  of 
its  reception,  is  sent  back  by  the  treasury  agent  to  the 
agent  of  the  Bank.  Every  fifteen  days  these  lists  are  ex- 
changed for  a  receipt  detached  by  the  agent  of  the  treas- 
ury from  a  duplicate  register.  On  the  same  dates  the 
agents  of  the  Bank  are  required  to  send  also  to  the  agent 
of  the  treasury  the  papers  showing  payments  which  have 
been  made  in  matters  which  do  not  require  his  signature. 

In  order  to  promote  the  convenience  of  both  parties,  the 
agents  of  the  Bank  and  of  the  State  are  usually  established 
in  the  same  building  or  in  close  relations  with  each  other. 

148 


National       Bank       of      Belgium 

The  criticism  has  been  made  in  some  quarters  that  the 
relationship  is  too  close  between  the  State  and  the  Bank, 
and  that  the  credit  of  the  Bank  would  suffer  if  the  credit 
of  the  State  were  attacked  through  violations  of  the  neu- 
trality of  Belgium  or  from  other  causes.  It  was  declared 
in  the  debates  of  1872,  by  M.  Couvreur,  that  the  serious 
dangers  to  which  the  Bank  had  been  exposed  in  1870  had 
arisen  solely  from  the  close  connection  between  the  Bank 
and  the  State  created  by  the  law  of  1850.  Summing  up 
the  multiplicity  of  services  performed  by  the  Bank  in  its 
relations  with  the  treasury,  a  historian  of  the  bank 
declares :  <^ 

"Such  are  the  functions  which  the  organic  laws  have 
imposed  upon  the  National  Bank  of  Belgium.  In  fine, 
this  establishment  is  a  true  cashier  of  the  State,  while  the 
agents  of  the  treasury  are  only  simple  bookkeepers,  having 
nothing  to  do  with  the  handling  of  funds.  Taxes  and 
imposts  of  all  sorts  are  collected  by  particular  officers, 
receivers  of  direct  taxes,  customs,  excises,  taxes  for  regis- 
tration, for  successions,  lands,  right  of  navigation,  guar- 
dians of  mortgages,  collectors  for  the  post-office  and  the 
telegraph,  and  station  masters  of  the  State  railways;  but 
the  proceeds,  garnered  up  by  the  agents  of  the  treasury,  are 
paid  immediately  to  the  agent  of  the  cashier  of  the  State — 
that  is,  into  the  vaults  of  the  National  Bank. 

"The  responsibility  of  the  Bank  is  from  this  fact  con- 
siderable, but  it  bears  only  on  the  substance  of  the  cash 
belonging  to  the  State.  The  latter  reserves  the  responsi- 
bility of  the  bookkeeping,  without  which  the  Bank  is 
neither  able  nor  ought  to  pay,  and  it  is  represented  in  this 

a  Noel  I,  p.  556. 
149 


National     Monetary     Commission 

respect  by  thirty  principal  agencies,  determined  by  the 
judicial  or  ad*ninistrative  districts,  and  by  auxiliary 
agencies." 

The  manner  in  which  direct  disbursements  and  receipts 
by  the  Bank  on  behalf  of  the  treasury  have  grown  during 
the  last  forty  years  is  indicated  in  the  table  below.  The 
reduction  in  the  balance  after  1870  is  due  to  the  agree- 
ment made  in  1872  by  which  the  excess  of  the  treasury 
balance  above  current  needs  should  be  invested  by  the 
Bank  in  foreign  bills  for  the  account  of  the  treasury. 

Transactions  for  the  Treasury. 


Year. 


Receipts. 


Payments. 


Balaiice, 
Dec.  31. 


1868 
1870 
187s 
1880 
1890 
1900 
190S 
1906 
1907 
1908 


Francs. 
275.500. 
262, 200, 
459. 700. 
801, 100, 

1,  100, 100, 
1.895.554. 
2.369.330. 
2.65s.  735. 

2,  790,  284, 
2,  767,  600, 


000 
000 
000 
000 
000 
000 
000 
000 
000 
000 


Francs. 
262, 900, 
285, 700, 
467,  600, 
804, 100, 

1,  100,  300, 
1.906,49s. 
2,370,  181, 
2,655,998, 

2,  021,  621, 
2,868,  ISO, 


000 
000 
000 
000 
000 
coo 
000 
000 
000 
000 


Francs. 
89, 400, 000 
57,  100,  000 
33, 600, 000 
27,  000,  000 
28, 200, 000 
13.469.  522 
21, 171, 279 
12,935,  28s 
19.429.990 
12,  151.531 


In  addition  to  direct  receipts  and  disbursements  on  the 
cmrent  account  of  the  treasury  the  National  Bank  per- 
forms many  other  functions.  It  acts  as  registrar  and 
transfer  office  of  the  national  debt,  and  is  custodian  of 
bonds  given  by  public  officials  and  of  various  special  funds 
established  by  the  Government,  Uke  those  of  the  Postal 
Savings  Bank.  These  fimctions  impose  upon  the  Bank 
heavy  burdens  and  large  expenditures.  It  was  declared 
by  M.  Pirmez,  in  his  report  to  the  chambers  in  1872,  that 
the  annual  value  of  the  benefits  derived  by  the  State  from 


150 


National       Bank       of      B  e  I  g  i 


u  m 


the  operations  of  the  Bank  represented  more  than  a  half 
million  of  francs  ($96,500)/  If  this  was  the  case  in  1872, 
when  total  disbursements  and  receipts  footed  up  to 
683,600,000  francs  ($132,000,000),  the  benefit  to  the  State 
and  the  consequent  cost  to  the  Bank  have  since  been  mul- 
tiphed  many  times.  Total  receipts  and  disbursements  in 
1899,  which  represented  the  latest  figures  available  at  the 
time  of  the  discussion  over  the  charter  in  1900,  were 
3,375,000,000  francs  ($651,500,000),  or  about  five  times 
the  amount  when  M.  Pirmez  made  his  report  in  1872. 
This  might  not  in  itself  indicate  an  increase  of  the  charges 
by  a  corresponding  ratio,  but  in  other  fields  the  increase 
in  the  burdens  imposed  upon  the  Bank  showed  a  still 
larger  proportion  of  increase.  A  special  report  on  the 
services  rendered  by  the  Bank  to  the  State  was  made  by 
the  governor  to  the  general  council  on  May  29,  1897,  in 
which  he  declared  that  half  of  the  great  hall  of  the  Bank 
was  exclusively  devoted  to  the  pubhc  service,  which 
required  not  less  than  a  dozen  wickets.  Giving  a  graphic 
idea  of  the  daily  routine  in  the  Bank,  the  governor  con- 
tinued :  ^ 

"The  other  half  of  the  hall  is  reserved  to  the  operations 
of  the  Bank  for  its  own  account.  There  notes  are  ex- 
changed for  specie  and  specie  for  notes.  There  discounters 
come  to  return  the  receipts  delivered  in  exchange  for 
their  documents;  there  also  checks  are  settled,  current 
accounts  dealt  with,  and  all  drafts  are  paid.  In  spite  of 
this  multiplicity  of  varied  services,  the  congestion  is  in 
general  less  than  at  the  windows  where  operations  are 

oDocuments  OfFiciels:   1872,  p.  35. 

'fr  Documents  Parlementaires:  1900,  p.  220. 


151 


National     Monetary     Co  mm  i s s  io 


n 


carried  on  for  account  of  the  State.  There,  at  the  periods 
of  the  maturity  of  the  coupons  of  the  pubhc  debt,  of  the 
annuity  bank  (Caisse  d'Annuites),  of  communal  credit, 
and  of  the  local  railways,  on  the  eve  and  the  morrow  of 
settlements  for  the  Government,  at  the  moment  of  pension 
payments,  the  influx  is  such  that  the  guards  established 
for  supervision  of  the  matter  are  compelled  to  insist  that 
everA'-one  take  his  place  at  the  different  wickets  in  the 
order  of  ari'ival.  If,  as  often  happens,  there  are  added  to 
these  numerous  operations  the  payments  on  account  of 
the  public  offices,  the  post-office,  and  the  railwavs,  or 
even  the  deposit  of  securities  on  account  of  the  Bank  of 
Deposits  and  Consignations,  it  requires  all  the  coolness 
and  intelligence  of  our  force  to  prevent  difficulties,  errors, 
and  complaint." 

Undertaking  to  sum  up  some  of  the  costs  to  the  Bank 
of  this  service,  it  was  pointed  out  that  those  agencies  in 
which  there  was  no  discount  office  imposed  an  expense 
without  any  compensating  profit.  In  addition  there  was 
at  Brussels  a  public  cashier,  having  under  his  orders  a 
group  of  fimctionaries  and  employees  all  paid  by  the  Bank, 
but  occupied  with  nothing  else  than  this  service.  More- 
over, this  force  would  be  absolutely  inadequate  if  at  every 
moment  the  management  did  not  detach  from  the  forces 
of  the  Bank  a  certain  number  of  employees  and  collectors, 
who  lent  their  aid  on  the  days  when  the  need  assumed 
unexpected  proportions,  like  the  days  when  it  was  neces- 
sary to  classify  securities,  detach  coupons,  and  receive 
payments  of  notes,  silver,  and  nickel.  Comparing  condi- 
tions in  1896,  the  latest  year  then  available,  with  those  of 
earlier  years,  it  was  declared  that  the  number  of  coupons 

152 


National      Bank       of      Belgium 

paid  in  1870  amounted  to  only  349,314,  while  in  1896  the 
number  was  1,242,257,  for  a  total  amount  of  16,870,382 
francs.  The  progression  was  hardly  less  rapid  during  the 
twelve  years  after  1896,  the  number  of  coupons  paid  in 
1908  on  all  classes  of  obligations  rising  to  3,266,620.  In 
addition  to  these  coupons  paid  over  the  counter,  there 
were  detached  from  securities  deposited  in  government 
funds  in  1908  coupons  to  the  number  of  1,592,700. 

The  special  report  of  1897  declared  that  the  conver- 
sion of  the  2>%  per  cent  debt  and  the  3  percents  had  occa- 
sioned a  movement  of  more  than  2,000,000,000  francs  in 
securities  of  the  Belgian  debt  and  that  the  renewal  of  the 
coupons  of  the  annuity  bank  had  caused  a  movement  of 
more  than  50,000,000  francs.  The  law  of  September  11, 
1895,  authorizing  pensions  to  be  paid  monthly,  had  resulted 
in  the  presentation  of  10,000  additional  orders  at  Brussels 
alone.  The  Bank  had  been  compelled  to  construct  new 
deposit  boxes  to  guard  the  numerous  securities  confided 
by  the  State  to  its  care.  According  to  the  balance  sheet 
of  December  31,  1896,  deposits  of  pubHc  funds  on  Gov- 
ernment account  already  amounted  to  1,011,125,354 
francs.  This  amount  had  increased  on  December  31,1 908 , 
to  1,752,298,028  francs. 

The  increase  in  the  service  of  the  debt  was  a  natural 
consequence  of  the  increase  in  public  obligations.  Down 
to  1873  the  debt  of  Belgium  consisted  chiefly  in  about 
500,000,000  francs  in  4^^  percents.  By  1899  the  total  of 
the  debt  had  risen  to  2,369,000,000  francs,  partly  from 
the  fact  that  the  Government  assumed  the  debt  of  the 
railway  trunk  lines  which  were  taken  over  by  the  vState. 
Special  issues  for  local  railways,  the  Congo,  and  various 

153 


National     Monetary     Commission 

public  enterprises  not  only  increased  the  amount  of  the 
debt,  but  greatly  added  to  the  complications  of  registra- 
tion, transfer,  and  payment  of  coupons/' 

In  spite  of  the  large  part  played  by  treasury  operations 
in  the  business  of  the  Bank,  it  remains  to  be  said  that  the 
Government  has  never  yet  felt  compelled  to  abuse  its 
influence  over  the  Bank  to  extort  large  loans.  One  of  the 
questions  addressed  to  the  Government  by  the  central 
section  of  the  chambers,  pending  the  renewal  of  the  char- 
ter in  1900,  was  whether  the  State  was  a  borrower  from 
the  National  Bank.  The  answer  of  the  Government  was 
simple  and  direct  i** 

"The  State  does  not  borrow  from  the  National  Bank. 
The  Government  possesses  no  other  authority  to  borrow 
than  that  inscribed  in  the  regular  budget  or  in  special 
laws,  i.  e.,  by  the  issue  of  securities  of  the  public  debt  or 
by  the  negotiation  of  treasury  bonds.  The  employment 
made  of  these  authorizations  is  set  forth  in  the  statement 
of  condition  of  the  treasury  and  the  accounts  of  the 
administration  of  finance,  distributed  annually  to  the 
members  of  the  legislative  chamber.  Under  authority  of 
its  statutes  the  Bank  may  discount  to  a  maximum  of 
10,000,000  francs  treasury  bonds  issued  in  virtue  of  the 
authority  above  set  forth.  Article  27  of  the  statutes  of 
the  Bank  provides  that  'the  conditions  of  discount  for 
treasury  bonds  shall  be,  as  to  rate  and  time,  the  same  as 
for  commercial  paper.'  The  treasury  bonds  thus  dis- 
counted by  the  Bank  are  included  in  the  domestic  assets." 

a  Documents  Parlementaires :   1900,  p.  450. 
6  Ibid.,  p.  189. 


154 


National      Bank       of      Belgium 

It  was  not  admitted  by  the  critics  of  the  Bank,  however, 
that  these  services  to  the  State  had  been  performed  with- 
out both  direct  and  indirect  compensation.  In  an  elabo- 
rate analysis  of  the  subject  in  the  debates  in  the  cham- 
ber, M.  Grimard  declared  that  when  the  Bank  dealt  with 
the  State  it  forgot  that  it  owed  to  the  latter  everything; 
for  when  the  State  made  a  bank  its  cashier  the  Bank  by 
that  fact  acquired  a  considerable  moral  force  in  the  public 
eye.  The  treasury  itself  kept  a  balance  on  current 
account,  which  on  December  31,  1898,  stood  at  47,000,000, 
francs  ($9,071,000).''  Interest  upon  this  sum,  computed 
at  3.30  per  cent,  would  afford  a  profit  of  1,424,100  francs 
($274,850).  In  the  case  of  the  savings  bank,  moreover, 
the  Bank  collected  a  twentieth  part  of  the  proceeds  of 
loans  on  pledges.  Such  loans  in  1897  were  94,400,000 
francs,  upon  which  interest  at  the  rate  of  4  per  cent 
amounted  to  3,776,000  francs,  of  which  the  Bank  took 
188,800  francs  ($36,300).  For  the  commission  charged 
when  loans  by  the  savings  bank  were  made  through  the 
discount  offices  also,  M.  Grimard  computed  earnings  by 
the  Bank  of  110,506  francs  ($21,330),  making  a  total  (with 
another  small  item)  of  321,106  francs  ($62,000).  The 
Bank  profited  also  from  its  alleged  gratuitous  services  to 
the  public  in  the  sale  of  drafts  by  the  balances  of  money 
always  in  its  hands.  ^ 

a  This  figure  was  rather  exceptionally  high.  The  average  balance  during 
1898  was  29,053,979  francs.  The  balance  on  December  31,  1904,  was 
22,022,462  francs  and  the  average  for  1904  i3,555.oof>  francs;  the  balance 
on  December  31,  1908,  was  12,151,531  francs  and  the  average  for  1908 
18,985,039  francs. 

&  Discussions  Parlementaires:   i9cx>,  pp.  72-80. 


155 


National     Monetary     Commission 

INVESTMENTS  ON  BEHALF  OF  THE  TREASURY. 

The  Government  of  Belgium,  not  content  with  imposing 
upon  the  National  Bank  the  gratuitous  performance  of  all 
ser\'ices  required  in  treasury  operations  and  the  manage- 
ment of  the  public  debt,  requires  the  Bank  to  invest  for  the 
profit  of  the  treasury  any  surplus  in  the  government  bal- 
ance above  actual  current  needs.  The  point  at  which  such 
investments  are  taken  up  is  when  the  treasury  balance  ex- 
ceeds 5,000,000  francs.  The  investment  is  required  to  be 
made,  not  in  long  time  obligations,  but  in  commercial 
paper.  The  bank  is  authorized  to  make  the  selection  of 
the  paper  in  which  the  public  funds  are  invested,  but  is  re- 
quired to  guarantee  its  value  to  the  treasury.  An  arrange- 
ment with  the  Government  on  July  17,  1872,  prescribed 
that  the  investment  was  to  be  made  in  general  in  purchase 
of  commercial  securities  drawn  on  foreign  countries,  pay- 
able in  cash,  but  that  it  might  be  made  under  some  circum- 
stances in  domestic  paper.  While  the  Bank  guarantees 
the  payment  of  the  securities,  the  government  permits 
losses  as  well  as  profits  resulting  from  exchange  to  be 
charged  to  the  account.  It  also  permits  the  inclusion  of 
cost  of  insurance,  transfers  of  specie,  commissions  paid  to 
foreign  houses  and  commissions  paid  to  discounters  or  other 
intermediaries  to  which  the  Bank  may  have  recourse.'^ 

This  service  in  itself  has  become  of  considerable  im- 
portance and  has  imposed  serious  labor  upon  the  Bank. 
In  the  report  of  the  Chevalier  Descamps  in  1900,  the  re- 
ceipts for  1 899  on  account  of  transactions  of  this  character 
for  the  treasury  were  stated  at  379,652,858  francs  and  dis- 

o  Documents  Officiels:  1872,  p.  XXVII. 
156 


National      Bank       of      Belgium 


bursements  at  378,053,332  francs  ($73,000,000).  The  bal- 
ance to  the  credit  of  the  Government  on  December  31, 
1899,  was  31,340,401  francs  ($6,050,000),  consisting  of 
paper  held  at  Brussels  to  the  amount  of  23,424,986  francs 
and  balances  with  foreign  correspondents  to  the  amount 
of  7,915,415  francs.'^  The  investment  of  this  considerable 
sum  affords  the  treasury  a  respectable  profit,  in  addition 
to  the  taxes  and  participation  in  the  profits  of  the  Bank 
which  are  based  upon  general  law  and  the  provisions  of  the 
charter.  The  profits  realized  from  the  operations  of  1899 
were  640,343  francs  ($123,500).  The  balance  of  this  in- 
vestment fund  and  the  profit  to  the  treasury  have  been  in 
recent  years  as  follows: 

Profits  from  treasury  investments. 


Year. 


Balance. 
Dec.  31. 


Profit  for 
year. 


190S 
1906 
1907 
1908 


Francs. 
34.791.309 
44.SS7.86i 

2.435.659 
37,814.692 


Francs. 

1. 032,  200 
881,800 
790, 000 
730, 000 


SERVICES   PERFORMED    FOR   THE   GENERAL   SAVINGS    BANK 

It  was  provided  by  Article  XI  of  the  original  charter  of 
the  National  Bank  that  if  a  general  savings  bank  should  be 
established,  the  Government  reserved  the  right  to  have  its 
operations  carried  on  through  the  National  Bank.  The 
proposal  to  establish  a  savings  bank  was  realized  by  the  law 
of  March  16,  1865,  which  provided  also  for  absorbing  into 
the  new  institution  the  retirement  fund  established  by  a 


a  Documents  Parlcnientaires:    1900,  p.  453. 


157 


National     Monetary     Commission 

law  of  May  8,  1850,  The  Government  was  authorized  to 
make  an  advance  of  50,000  francs  for  the  initial  expenses 
of  the  savings  bank  and  later,  by  the  laws  of  March  26, 
1866,  and  December  28,  1867,  opened  new  credits  with  the 
same  object  to  the  amount  of  150,000  francs. 

The  Belgian  institution  was  framed  upon  different 
models  from  the  savings  banks  established  in  France  and 
England.  It  aimed  not  merely  to  implant  the  principle  of 
economy,  but  sought  to  surround  the  withdrawal  of  de- 
posits with  such  formalities  and  disadvantages  as  would 
deter  depositors  from  making  unwise  use  of  their  savings 
after  they  had  been  accumulated.  As  inducements  to 
leave  money  with  the  Bank,  the  law  admitted  depositors 
to  a  share  in  the  profits  which  might  accumulate  in  excess 
of  the  interest  regularly  allotted.  The  Government  was 
authorized  after  each  five-year  period  to  divide  a  part  of 
the  reserve  fund  among  the  accounts  existing  for  at  least  a 
year  and  derived  from  the  earnings  of  the  previous  five 
years." 

In  order  to  realize  satisfactory  profits,  moreover, 
investments  were  made  not  wholly  in  securities  of  the 
public  debt,  but  in  mortgages  and  commercial  loans.  In 
discussing  the  progress  of  the  Bank  in  1872,  M.  Frere- 
Orban  declared  that  it  had  even  then  a  sum  of  25,000,000 
francs  which  was  at  the  disposition  of  landowners,  manu- 
facturers, and  merchants  for  operations  which  were  out- 
side the  scope  of  the  National  Bank,  because  they  were 
securities  not  distinctively  commercial  and  had  a  longer 
term  than  that  prescribed  for  the  assets  of  the  Bank. 

oNoel,  I  ,  p.  565. 


158 


National      Bank       of      Belgium 

This  exceptional  character  of  the  savings  bank  invest- 
ments has  imposed  upon  the  National  Bank  a  large 
amount  of  labor  in  seeking  and  scrutinizing  proper  invest- 
ments, attending  to  collections  and  renewals,  and  other- 
wise performing  banking  functions  for  the  savings  bank. 
The  savings  bank  funds  have  been  used  in  the  develop- 
ment of  such  economic  works  as  the  Credit  Foncier  (land 
bank)  and  the  Society  of  Working  Men's  Homes.'*  Some- 
thing has  been  accomplished  also  in  the  promotion  of 
agricultural  credit  banks. 

By  a  decree  of  March  25,  1891,  the  governing  board  of 
the  savings  bank  fixed  the  rate  and  general  conditions  of 
loans  to  be  granted  to  individuals,  associations,  provinces, 
and  communes  for  the  construction  and  purchase  of  work- 
ing men's  houses.  Under  the  influence  of  the  savings 
bank  a  great  number  of  societies  of  working  men's  houses 
have  been  founded  and  form  an  intermediary  between 
the  working  men  and  the  Bank.  The  latter  advances 
funds  at  an  interest  rate  oi  2)4  per  cent  for  the  credit 
societies  which  accept  the  supervision  of  the  Bank  and  at 
3  per  cent  for  others.  These  credit  societies  are  those 
which  refrain  from  direct  ownership  of  fixed  property, 
but  promote  by  way  of  loans  the  construction  and  purchase 
of  houses.  The  savings  bank  provides  also  for  insurance 
for  the  fulfillment  of  such  contracts.  On  December  31, 
1906,  the  savings  bank  had  advanced  to  128  societies  of 
credit  91,190,037  francs  ($17,600,000)  and  to  43  building 
societies  4,763,880  francs  ($920,000).'' 

aUlens,  p.  370. 

6  Annuaire  Statistique  de  La  Belgique,  1907,  pp   xxxiv-xxxv. 


159 


National     Monetary      Commission 

The  National  Bank  has  been  the  custodian  of  the  securi- 
ties owned  by  the  savings  bank  or  upon  which  loans  have 
been  made,  and  the  work  involved  in  handling  the  busi- 
ness has  been  considerable.  The  savings  bank  has  had  a 
cash  balance  at  the  National  Bank  which  is  merged  in 
the  balance  sheet  with  other  current  accounts.  The 
amount  of  this  balance  varies  from  time  to  time  according 
to  the  excess  of  receipts  or  payments  on  savings  bank 
account.  The  amount  on  December  31,  1899,  when  the 
extension  of  the  charter  was  under  discussion,  was 
4,458,633  francs.  The  amount  on  December  31,  1908, 
was  8,807,463  francs.  The  securities  in  the  custody  of 
the  Bank,  however,  including  mortgages,  bonds,  and 
foreign  bills,  have  tended  to  increase  with  the  growth  of 
the  deposit  liabilities  of  the  savings  bank.  The  growth 
of  the  latter  is  indicated  in  a  summary  manner  by  the 
following  table: 

Growth  in  deposits  of  the  savings  bank. 


December  31 — 


Accounts. 


Total  deposits. 


1890 
1900 
190S 
1906 


200,565 

731.057 

I.  757.906 

2.311,845 

2, 419, 710 


Francs. 
125, 098, 287 
325,415,412 
661.507,886 
785. 704.576 
812,  092,  923 


Only  a  portion  of  this  liability  is  represented  by  securi- 
ties in  the  custody  of  the  National  Bank,  because  a  con- 
siderable part  has  been  converted  into  securities  held  by 
depositors.  The  value  of  securities  of  various  sorts,  in- 
cluding commercial  paper  and  foreign  bills,  in  the  custody 
of  the  National  Bank  increased,  however,  from  152,934,897 


160 


National       Bank       of      Belgium 

francs  on  December  31,  1898,  to  234,322,680  francs 
($45,220,000)  on  December  31,  1908. 

In  a  special  report  made  by  the  governor  of  the  National 
Bank  to  the  general  council  of  the  Bank  on  May  29,  1897, 
it  was  pointed  out  that  the  securities  held  for  the  savings 
bank  increased  from  22,641,338  francs  on  December  31, 
1872,  to  143,202,268  francs  on  December  31,  1896,  multi- 
plying by  six  times  the  volume  of  labor  imposed  upon  the 
Bank.  In  a  report  of  an  earlier  date  in  the  same  year,  it 
was  declared  that  the  receipts  and  disbursements  in  the 
provinces  on  savings  bank  deposit  books  represented  in 
1896,  340,250  operations,  involving  a  movement  of  127,- 
452,000  francs.  Including  receipts  and  disbursements  at 
Brussels,  the  total  of  operations  on  account  of  the  savings 
bank  amounted  to  538,252,000  francs.  Moreover,  paper 
had  been  discounted  at  the  National  Bank  for  account  of 
the  savings  bank  to  the  number  of  20,000  pieces,  repre- 
senting a  value  of  406,700,000  francs.  It  was  necessary 
for  the  National  Bank  to  verify  the  documents  in  such 
cases  discounted  at  Brussels,  those  discounted  by  the 
comptoirs,  and  those  remitted  by  foreign  correspondents. 
The  report  continued:'* 

"The  Bank  is  compelled  to  note  if  each  piece  of  paper 
is  regularly  drawn,  accepted,  indorsed,  and  stamped. 
After  all  these  verifications  by  the  discount  division,  the 
securities  are  deposited  in  distinct  compartments  of  the 
service.  They  are  withdrawn  at  maturity  to  secure  col- 
lection either  at  the  head  office,  at  the  agencies  abroad, 
or  by  the  post,  all  being  done  according  to  papers  prepared 
by  the  National  Bank.     Double  operations,  therefore,  of 

o  Documents  Parlementaires:   1900,  p.  230. 
85519—10 II  161 


National     Monetary     Commission 

entry  and  outgo,  have  to  be  each  time  examined,  verified, 
and  audited,  gi^^ng  occasion  for  a  movement  of  more  than 
800,000,000  francs.  But  of  all  the  services  of  the  savings 
bank,  that  which  has  increased  in  the  most  sensible  pro- 
portion is  that  of  loans  on  public  funds.  Ten  years  ago 
(1886)  the  Bank  effected  for  the  savings  bank  900  loan 
operations  for  21,600,000  francs.  In  1896  the  number  of 
operations  had  risen  to  5,650  and  the  amount  of  the  loans 
to  103,500,000  francs  ($20,000,000).  Here  again  the  Na- 
tional Bank  is,  without  any  aid,  giving  its  efforts  to  the 
operations  which  are  carried  on.  It  is  in  our  bureaus  that 
contracts  are  framed  which  are  sometimes  very  extended, 
in  view  of  the  long  enumeration  of  securities  pledged.  It 
is  the  Bank  which  preserves  the  duplicates,  verifies  the 
securities  deposited,  and  assumes  the  custody  of  them. 
Besides  these  recorded  documents  which  the  savings  bank 
possesses,  it  has  assets  consisting  of  bonds  of  credit  estab- 
lishments, railways,  industrial  and  other  corporations,  all 
payable  to  bearer,  which  form  one  of  the  elements  of  its 
definitive  investments.  These  assets,  on  December  31, 
1896,  amounted  to  168,529,710  francs.  It  is  the  Bank 
which  has  the  custody  of  them  and  the  importance  of  these 
holdings  is  steadily  increasing,  and  is  one  of  the  causes 
which  have  decided  us  to  ask  the  necessary  credit  for  the 
construction  of  a  second  vault.  *  *  *  The  savings 
bank  does  not  see  a  single  paper,  does  not  handle  a  single 
security.  Absolutely  everything  is  done  through  the  inter- 
vention of  the  National  Bank." 

In  spite  of  these  great  services  rendered  by  the  National 
Bank  to  the  savings  bank,  a  determined  effort  was  made 
at  the  time  of  the  renewal  of  the  charter  in  1900  to  impose 

162 


National       Bank       of      Belgium 

further  obligations  upon  the  National  Bank.  An  amend- 
ment was  moved  by  M.  Bertrand  that  the  National  Bank 
should  allot  to  the  savings  bank  interest  at  the  rate  of 
2%  per  cent  on  the  amounts  which  stood  to  the  credit  of 
the  savings  bank  in  current  account  at  the  National  Bank. 
It  was  declared  by  M.  Bertrand  that  the  Bank,  which 
already  made  enormous  profits,  could  well  afford  to  pay 
a  modest  interest  upon  the  capital  derived  from  the 
investment  of  funds  made  by  the  poor  and  humble.  It 
was  admitted  that  the  settled  policy  of  the  National 
Bank  was  not  to  pay  interest  on  current  accounts,  but 
as  an  exception  had  been  made  in  favor  of  the  current 
account  of  the  administration  of  hospitals,  it  was  argued 
that  a  similar  exception  should  be  made  for  the  account 
of  the  savings  bank.  It  was  contended  in  reply,  by 
M.  Iviebaert,  Minister  of  Industry  and  Labor,  that  the 
current  account  of  the  savings  bank  was  kept  in  the 
National  Bank  merely  to  make  payments  and  remittances 
and  could  not  be  profitably  converted  to  the  use  of  the 
National  Bank.'^  The  amendment  was  rejected  by  a 
vote  of  1 8  to  65.'' 

THE    MONETARY    EXPERIENCE    OF    BELGIUM. 

The  management  of  the  National  Bank  of  Belgium  has 
necessarily  been  influenced  to  a  large  degree  by  the 
monetary  experience  of  the  country.  This  experience 
has  covered  the  period  of  marked  variations  in  the  ratio 
between  gold  and  silver  which  began  with  the  great  gold 
discoveries  in  Australia  and  California  and  turned  in  the 


o  Discussions  Parlementaircs:   1900,  pj).  572-575. 
b  Ibid.,  p.  594.    . 


1C3 


National     Monetary     Commission 

contrary  direction  about  1867.  '^ l^c  difficulties  of  Belgium 
were  increased  by  the  fact  that  her  monetary  system  was 
the  same  as  that  of  France  and  was,  therefore,  subject  to 
many  of  the  vicissitudes  which  affected  the  French 
monetary  system. 

Belgium  adopted  the  French  system  of  decimal  coinage 
by  the  law  of  June  5,  1832.  The  monetary  unit  was 
declared  to  be  t^e  coin  of  5  grams  of  silver,  nine-tenths 
fine,  called  the  franc.  Provision  was  made  for  gold 
coins,  and  both  French  gold  pieces  and  silver  5-franc 
pieces  were  made  legal  tender  in  Belgium.  Under  the 
conditions  which  then  existed,  by  which  silver  was  made 
the  less  valuable  metal  at  the  coinage  ratio,  the  actual 
circulation  of  Belgium  consisted  of  silver.  Gold  coins 
were  rarely  seen.  It  was  not  until  1847,  three  years 
before  the  creation  of  the  National  Bank,  that  the  Belgian 
Chambers  adopted  a  series  of  measures  looking  to  the 
introduction  of  gold.  The  gold  coinage  was  to  be  issued, 
however,  only  by  the  Government  and  was  limited  to 
20,000,000  francs.  By  a  law  of  March  4,  1848,  the  legal 
tender  quality  was  given  to  the  English  sovereign  at  a 
nominal  rate  higher  than  its  value  as  bullion.  This 
resulted  in  the  importation  into  Belgium  of  EngHsh 
sovereigns  to  the  value  of  about  30,000,000  francs  and  the 
exportation  of  a  corresponding  amount  of  silver." 

The  time  was  approaching  when  the  output  of  the  Cali- 
fomian  mines  was  to  make  gold  the  cheaper  metal  at  the 
coinage  ratio.  The  legal  tender  quality  conferred  upon 
English  sovereigns  was  hastily  repealed  on  September  28, 
1849,  and  within  less  than  a  year  (June  14,  1850)  the  legal 

a  Willis,  A  History  of  the  Latin  Monetary  Union,  p.  17. 
164 


National       Bank       of      Belgium 

tender  quality  was  withdrawn  also  from  Dutch  gold 
pieces  of  lo  florins.  This  was  followed  on  December  28, 
1850,  by  still  a  third  law,  which  deprived  of  legal  tender 
quality  French  gold  in  use  in  Belgium.  This  was  largely 
a  formality,  as  neither  French  nor  Belgian  gold  was  in 
circulation.  Silver  was  recognized  as  the  sole  standard, 
the  coinage  of  gold  ceased,  and  a  royal  decree  of  August 
II,  1854,  demonetized  the  gold  coins  struck  under  the  law 
of  March  31,  1847,  and  provided  for  covering  them  into 
the  treasury  for  taxes. 

Belgium  was  thus  planted,  with  apparent  firmness,  upon 
the  silver  basis;  but  natural  economic  law  was  presently 
to  overturn  this  policy  and  make  her  again  a  gold  country. 
The  change  was  the  result  of  the  depreciation  of  gold, 
following  the  output  of  the  new  mines.  Gold  was  pouring 
into  France  and  silver  was  being  withdrawn  for  conversion 
into  bullion,  because  silver  coins  had  become  worth  more 
than  their  face  value  at  the  coinage  ratio.  New  Belgian 
silver  coins  were  withdrawn  from  circulation,  like  the  new 
French  coins.  The  abraded  coins  of  France  at  first  found 
their  way  into  circulation  in  Belgium,  but  even  they  soon 
began  to  be  withdrawn  for  the  bullion  market  and  a 
scarcity  of  silver,  even  of  subsidiary  coins,  began  to  be  felt. 
France  having  practically  attained  a  gold  standard 
because  gold  was  the  depreciated  metal,  it  was  difficult  for 
Belgium  to  adhere  to  a  different  monetary  system.  Hence 
arose  the  law  of  June  4,  1861,  by  which  Belgium  again 
made  French  gold  a  legal  tender  and  authorized  the  coin- 
age of  Belgian  gold  pieces  according  to  the  French  system. 
The  fluctuations  between  gold  and  silver  now  became  less 
marked,  but  were  sufficient  to  afford  profit  to  the  spccu- 

165 


National    Monetary     Commission 

lators  and  to  cause  many  difficulties  to  the  National  Bank, 
The  geographical  position  of  Belgium  probably  had  an 
influence  in  exposing  her  to  the  vicissitudes  of  such  a  situ- 
ation.    It  is  declared  by  Willis:^' 

"Whenever  a  speculator  found  that  the  price  of  gold 
and  silver  was  such  that  he  could  make  a  profit  by  shipping 
either  metal  to,  or  withdrawing  it  from,  any  of  these  coun- 
tries of  different  standards,  he  made  the  Bank  of  Belgium 
the  basis  of  operations,  thus  depleting  its  reserves  or  caus- 
ing a  plethora  of  coin  as  the  case  might  be,  as  well  as  setting 
on  foot  a  tendency  to  scarcity  or  redundancy  of  the  circu- 
lating medium.  In  1861  the  gold  reserve  of  the  Ban  que 
Nationale  sank  suddenly  from  22,000,000  to  7,000,000  and 
the  silver  reserve  rose  as  sharply  from  11,500,000  to 
17,000,000,  while  the  rate  of  discount  fluctuated  from  4.6 
to  3  per  cent.  In  December,  1862,  the  gold  reserve  was 
17,000,000;  in  the  following  February  it  had  sunk  to 
9,000,000,  and  in  the  April  succeeding  it  was  5,000,000, 
while  during  the  same  time  the  reserve  of  silver  5 -franc 
pieces  had  risen  but  1,000,000.  About  the  same  time 
the  Bank  was  forced  temporarily  to  cease  payment  in  silver 
5-franc  pieces,  for  a  sudden  contrary  movement  reduced 
the  reserve  of  silver  5-franc  pieces  first  to  5,000,000  and 
then  to  2,000,000,  and  the  rate  of  discount  fluctuated 
between  3  and  6  per  cent,  which  were  the  extreme  limits. 
In  1865  the  rate  of  discount  rose  from  4  to  5.8  per  cent, 
following  a  corresponding  movement  in  the  reserv^e.  Dur- 
ing all  this  period  the  normal  rate  was  from  2.5  to  3  per 
cent,  so  that  the  inconveniences  undergone  by  the  busi- 
ness public  may  readily  be  appreciated.     Thus  the  reserves 

o  A  History  of  the  Latin  Monetary  Union,  pp.  24-25. 
166 


National       Bank       of      Belgium 

of  the  Bank  were  now  depleted  on  the  gold  and  now  on 
the  silver  side,  and  sometimes  on  both.  This  was  rendered 
even  worse  by  the  method  of  restoring  the  reserve.  A 
delay  was  usually  unavoidable,  and  this  was  protracted 
as  long  as  possible,  until  the  rate  of  exchange  was  reversed, 
when  it  was  profitable  to  send  back  the  coin  just  with- 
drawn." 

It  was  with  a  view  to  escape  from  such  difficulties  that 
Belgium  was  finally  led  to  propose  the  formation  of  the 
Latin  Union.  She,  in  common  with  Italy  and  Switzer- 
land, had  adopted  the  decimal  system  of  coinage,  with  the 
franc  as  the  unit,  but  thus  far  there  had  been  no  coopera- 
tion among  them  as  to  the  regulation  of  the  circulation  .** 
The  disappearance  of  subsidiary  coins,  because  of  their 
high  value  in  relation  to  gold,  was  met  in  Switzerland  by 
a  law  of  January  31,  i860,  reducing  the  fineness  of  sub- 
sidiary coins  from  nine-tenths  to  eight-tenths.  The  Gov- 
ernment of  Italy  by  the  law  of  August  24,  1862,  adopted 
the  fineness  of  0.835  ^oi"  its  subsidiary  silver.  The  French 
Government  for  some  time  hesitated  to  act,  but  finally,  by 
a  law  of  May  25,  1864,  adopted  the  fineness  of  0.835  ^or  the 
small  silver  coins  of  50  centimes  and  20  centimes.''  France 
had  in  the  meantime,  by  a  decree  of  April  14,  1864,  refused 

o  Switzerland  adopted  the  French  system  by  the  law  of  May  7,  1850; 
Italy  by  the  law  of  August  24,  1862.  Greece  adopted  the  French  system 
August  10,  1867,  and  appHed  for  admission  to  the  monetary  union  Novem- 
ber 18,  1868.  The  papal  government  by  a  decree  of  June  18,  1866,  adopted 
the  French  system,  but  was  not  formally  admitted  to  the  union —  A 
History  of  Banking  in  All  the  Leading  Nations,  III,  349-352).  Spain 
adopted  the  French  system  by  the  law  of  October  19,  1868,  but  did  not 
become  a  member  of  the  union;  and  it  was  adopted  by  each  of  the  Balkan 
States  after  their  emancipation  from  Turkey  in  1878,  l)ut  without  becoming 
members  of  the  union. 

b  Arnaun^,  La  Monnaie,  Ic  Cr^idit,  et  le  Change,  3(1  ed.,  p.  227. 


167 


National     Monetary     Commission 

to  receive  the  Swiss  coins  at  public  offices,  in  order  to  stop 
their  substitution  for  the  more  valuable  French  coins. 
Belgium  was  left  without  an  adequate  subsidiary  currency 
and  she  made  proposals  early  in  1865  to  France  to  hold  a 
conference  of  those  countries  which  had  adopted  the 
French  monetary  system.  The  proposal  was  welcomed 
Italy  and  Switzerland  soon  indicated  their  acceptance, 
and  the  first  convention  of  the  Latin  Union  met  in  Paris 
on  November  20,  1865. 

The  outcome  of  this  conference  (embodied  in  the  con- 
vention of  December  23,  1865)  was  the  decision  to  adopt 
in  all  the  countries  of  the  union  the  ratio  of  0.835  fo''  the 
silver  coins  below  5  francs.  It  was  decided  to  limit  the 
output  of  subsidiary  coins  to  6  francs  per  capita  of  the 
population  of  each  country.  Direct  action  in  regard  to 
the  metallic  standard  was  avoided,  although  the  adoption 
of  gold  was  urged  by  the  delegates  of  all  the  other  coun- 
tries upon  France.  In  this  discussion  a  Belgian  delegate, 
M.  Kreglinger,  took  the  lead,  declaring  that  the  bimetallic 
regime  subjected  the  various  countries  to  an  alternating 
standard  which  produced  financial  stringency  by  draining 
specie  from  the  bank  reserves  and  by  thus  forcing  the 
banks  to  raise  their  rate  of  discount."  It  was  felt,  how- 
ever, to  be  largely  an  academic  question,  as  gold  had 
become  in  fact  the  standard  and  the  principal  medium  of 
circulation  since  it  had  fallen  below  silver  in  value  at  the 
coinage  ratio. 

The  provisions  made  by  the  convention  in  regard  to 
the  legal  circulation  of  the  coins  in  the  countries  other 
than  those  where  they  were  issued  are  important,  because 

a  Willis,  p.  45. 
168 


National      Bank       of      Belgium 

they  constituted  to  a  large  degree  the  essence  of  the  agree- 
ment and  it  was  the  change  in  these  provisions  which 
nearly  destroyed  the  union  in  1885.  Each  of  the  con- 
tracting governments  agreed  to  receive  freely  at  its  public 
offices  the  money  coined  by  the  other  three  States — with- 
out limitation  as  to  gold  and  as  to  silver  pieces  of  5  francs, 
and  to  amounts  of  100  francs  ($19.30)  as  to  the  subsidiary 
silver  pieces.  The  latter  were  to  be  legal  tender,  even 
within  the  country  of  issue,  only  to  the  amount  of  50 
francs.  The  circulation  of  gold  coins  was  unrestricted. 
The  states  which  issued  them  were  under  no  obligation  to 
redeem  them,  but  they  were  receivable  at  par  at  the  pub- 
lic offices  of  all  the  states  except  when  reduced  below  the 
limit  of  tolerance.  These  provisions  also  extended  to  the 
5-franc  pieces  of  silver,  and  it  was  the  insistence  of  France 
upon  modifying  them  which  caused  the  threatened  rup- 
ture of  1885.  In  regard  to  the  subsidiary  pieces,  it  was 
provided  from  the  first  that  they  should  be  taken  back 
by  the  issuing  Government  and  paid  for  in  gold  or  in  silver 
5-franc  pieces,  this  obligation  to  remain  in  force  for  two 
years  after  the  expiration  of  the  treaty.^ 

The  convention  of  1865  thus  left  untouched  the  legal- 
tender  quality  and  the  free  coinage  of  the  silver  5-franc 
pieces;  but  as  silver  was  undervalued  at  the  coinage  ratio 
none  was  being  brought  to  the  mints  and  the  5-franc  pieces 
had  all  but  disappeared  from  circulation.  These  condi- 
tions changed  so  radically  when  gold  appreciated  and  sil- 
ver fell  below  its  legal  value  at  the  coinage  ratio  that  the 
monetary  position  of  Belgium  became  seriously  disturb- 
ing to  farsighted  Belgian  economists.     The  mistake  was 

«  Arnaunc},  p.  228. 
169 


National     Monetary     Commission 

made  of  not  suspending  promptly  enough  the  coinage  of 
5-franc  pieces  after  it  became  clear  that  they  had  fallen 
below  gold  par.  The  minister  of  finance  of  the  time, 
^I.  Jules  Malou,  hesitated  to  close  the  mint  until  the 
amount  of  silver  coined  had  risen  in  1873  to  111,704,795 
francs  ($2 1 ,560,000) .  The  suspension  of  specie  payments  in 
Austria  at  about  this  time,  and  the  exclusion  of  Austrian 
coin  from  Germany  by  the  new  German  monetary  laws, 
threatened  to  send  nearly  the  entire  mass  of  Austrian 
thalers  to  the  Belgian  mints  for  coinage.  This  fact  finally 
decided  M.  Malou  to  take  action;  but  even  after  the  sus- 
pension of  free  coinage  he  allowed  himself,  during  the 
next  few  years,  to  be  seduced  into  the  further  coinage  of 
37,704,130  francs  at  the  profit  of  the  treasury,  which  later 
was  converted  into  a  heavy  loss." 

M.  Frere-Orban,  an  advocate  of  the  gold  standard,  had 
moved  a  resolution  as  early  as  July  22,  1873,  that  the  con- 
vention of  the  Latin  Union  be  convoked;  but  the  project 
was  not  accepted  by  the  ministry.^  M.  Malou  first  lim- 
ited the  coinage  of  5-franc  pieces  and  finally  secured  a  law 
from  the  Chambers  (December  18,  1873)  authorizing  the 
limitation  or  suspension  of  the  silver  coinage  until  January 
I,  1875.  In  the  course  of  the  discussion  preliminary  to 
the  passage  of  this  act,  it  was  contended  in  some  quarters 
that  the  adoption  of  the  system  of  forced  legal  tender  paper 
in  Italy  and  France  since  the  convention  of  1865  had  cre- 
ated conditions  which  absolved  Belgimn  from  her  alle- 
giance to  the  Latin  Union. "     This  view  was  not,  however, 

o  Ansianx,  Les  Problfemes  Actuals  de  la  Circulation  Metallique  et  Fidu- 
ciaire  en  Belgique,  p.  6. 
6  Willis,  p.  116. 
c  Ibid.,  p.  124. 

170 


National       Bank       of      Belgium 

adopted  by  the  Government,  nor  was  it  urged  at  the  con- 
vention of  the  Latin  Union  in  1874,  at  which  suspension 
of  the  silver  coinage  was  adopted  as  a  general  policy. 

It  was  obvious  that  for  the  great  mass  of  silver  coin 
which  had  been  issued  in  1873  commercial  use  could  not 
be  found  in  Belgium.  The  fact  that  Belgian  coins  were 
accepted  freely  in  France  afforded  an  outlet  there  for  con- 
siderable amounts;  but  Belgium  could  not  escape  ulti- 
mately responsibility  for  her  monetary  offspring.  When, 
in  1885,  silver  had  fallen  to  48Y^g-  pence,  or  about  20  per 
cent  below  par,  a  determined  effort  was  made  at  the  con- 
ference of  the  Latin  Union  to  compel  the  redemption  of 
the  excess  of  5 -franc  pieces  in  circulation  by  the  countries 
which  had  issued  them.  The  French  Government,  more 
powerful  than  all  the  other  countries  together,  would 
not  consent  to  the  continuance  of  the  Union,  except  upon 
the  condition  that,  upon  its  dissolution,  the  other  govern- 
ments should  pay  back  in  gold  the  amount  of  the  excess 
of  5-franc  pieces  found  in  the  French  circulation.  This 
meant  for  Belgium  so  heavy  an  obligation  that  a  rupture 
was  threatened.  The  Belgian  delegate  protested  strongly 
against  the  demands  of  France.  The  Belgian  Ministry 
took  an  equally  strong  attitude  and  in  the  Chambers  M. 
Fr^re-Orban  proposed  to  abandon  the  Latin  Union  and 
to  complete  the  liquidation  demanded  by  France  at  once, 
rather  than  to  postpone  it  until  a  time  when  new  condi- 
tions might  make  it  even  more  onerous.  He  already  antici- 
pated in  1885  that  the  fall  of  silver  was  far  from  having 
reached  its  end. 

Supported  by  these  views  at  home,  M.  Pirmez,  the  Bel- 
gian delegate,  and  his  associates,  withdrew  on  July  30th 

171 


National     Monetary     Com  m  i  s  s  ion 

from  the  conference.  A  protocol  was  partially  perfected 
by  the  remaining  powers,  which  included  a  provision  that 
Belgian  coins  should  be  no  longer  received  in  the  other 
countries  three  months  after  the  expiration  of  the  last 
convention."  The  situation  thus  created  was  so  serious, 
however,  that  toward  the  end  of  the  year  M.  Pirmez  was 
sent  back  to  Paris  a  second  time  and  there  finally  secured 
a  compromise  arrangement.  This  compromise  consisted 
in  the  division  of  the  fund  of  Belgian  5 -franc  pieces  into 
two  parts.  Half  of  the  amount  was  to  be  liquidated  in 
gold  in  the  manner  provided  by  the  original  proposal;  the 
other  half  was  to  be  left  to  the  play  of  the  laws  of  inter- 
national exchange.  In  order  to  seciu'e  this  concession, 
the  Belgian  Government  agreed  to  these  conditions: 

"  She  engages  not  to  introduce  into  her  monetary  regime 
any  change  which  might  impair  the  repatriation  of  the 
other  half  by  means  of  commerce  and  the  exchanges. 
This  engagement  shall  have  a  duration  of  five  years  from 
the  date  of  the  expiration  of  the  Union.  Belgium  may 
bring  it  to  an  end  by  accepting  the  obligation  to  redeem 
this  second  half  imder  the  conditions  provided  by  Article 
IV  of  the  arrangement.  In  any  case  the  Belgian  Govern- 
ment reserves  to  itself  the  right  to  introduce  into  its  mon- 
etar}^  legislation  the  changes  which  may  be  introduced 
into  the  monetary  legislation  of  France. 

"The  Belgian  Government  guarantees  that  the  balance 
shall  not  exceed  200,000,000  francs.  If  there  should  be 
an  excess,  it  will  be  redeemed  under  the  conditions  pro- 
vided by  Article  IV  of  the  arrangement." 

a  A  History  of  Banking  in  all  the  Leading  Nations,  III,  p.  375. 


172 


National       Bank       of      Belgium 

Under  this  agreement  Belgium  bound  herself  not  to  take 
steps  to  change  her  monetary  system  or  to  check  the  re- 
turn of  her  silver  coins  for  a  period  of  five  years  after  the 
dissolution  of  the  Latin  Union,  unless  she  should  be  ready 
to  redeem  at  gold  par  the  entire  mass  of  Belgian  silver 
which  M.  Malou  had  permitted  to  be  issued.  The  conven- 
tion of  1885  expired  on  January  i,  1891,  but  has  since 
been  renewed  from  year  to  year  by  tacit  agreement. 

In  case  the  Union  should  be  dissolved  and  Belgian  5 -franc 
pieces  should  be  returned  from  France  and  other  countries, 
grave  difficulties  would  confront  the  Government  in 
maintaining  the  gold  standard.  The  total  amount  of 
coinage  of  5 -franc  pieces,  from  the  first  issues  under  the 
monetary  law  of  1832  down  to  the  suspension  of  coinage 
in  1876,  was  495,678,210  francs  ($95,650,000),  or  an  aver- 
age of  more  than  $13  per  capita  for  the  present  pop- 
ulation of  Belgium.  This  total,  however,  is  subject  to 
considerable  deductions,  some  of  which  can  be  definitely 
ascertained  and  others  only  estimated.  The  effect  of 
these  deductions  is  thus  summed  up  by  M.  Ansiaux:  ^ 

"  If  from  this  sum  there  is  deducted  the  value  of  pieces 
officially  demonetized  and  recoined,  or  13,002,165  francs, 
there  remains  482,676,045  francs.  According  to  the 
unanimous  opinion  of  competent  persons,  this  figure  is 
much  above  the  stock  still  in  existence.  A  considerable 
quantity  of  pieces  bearing  the  effigy  of  Leopold  I  were 
recoined  and  exported  in  the  form  of  bars  to  the  extreme 
Orient  between  1851  and  1866 — that  is,  at  the  time  when 
the  metal  sold  in  the  market  at  a  price  superior  to  that 

«  Les  Problfemes  Actuels,  etc  ,  pp.  16-17. 


173 


National     Monetary     Commission 

fixed  by  the  Latin  Union,  by  which  the  value  of  the 
kilogram  of  silver  was  in  the  proportion  of  one  to  fifteen 
and  a  half  that  of  the  kilogram  of  gold.  It  can  not  be 
determined  with  precision  what  is  the  quantity  of  pieces 
which  have  been  eliminated  in  this  way  or  what  amoimt, 
from  1832  to  1907,  have  disappeared  in  some  other  manner. 
The  commissioner  of  the  mint  of  Belgium,  M.  Le  Grelle, 
expresses  the  opinion  that  'the  quantity  of  Belgian 
5 -franc  pieces  still  in  existence  may  be  considered  to  be 
below  375,000,000  francs.''^  To  arrive  at  this  conclusion 
he  relies  upon  various  texts,  from  which  he  ingeniously 
deduces  this  'characteristic  fact  of  the  disappearance  of 
at  least  three-quarters  of  the  Belgian  pieces  coined  from 
1832  to  1865.'^  In  a  note  addressed  in  1907  to  the  colonial 
committee,  relative  to  the  monetary  question,  the  Belgian 
Government  expresses  the  opinion  that  'the  quantity  of 
Belgian  5-franc  pieces  still  existing  may  be  estimated  at 
about  350,000,000  francs.'  "  " 

Whatever  the  amount  of  Belgian  5-franc  pieces  still  in 
existence  in  Europe,  not  more  than  half  are  now  probably 
in  circulation  in  Belgium,  leaving  the  balance  to  be  found 
chiefly  in  France  and  to  a  Umited  extent  in  other  coun- 
tries of  the  Latin  Union.  It  was  estimated  by  the  National 
Bank,  according  to  an  inquiry  made  in  1881,  that  the 
circulation  of  5-franc  pieces  in  Belgium  was  275,000,000 
francs  ($53,080,000).  This  estimate  was  reduced  for 
1898  to  200,000,000  francs,  and  for  1900  to  a  still  smaller 

a  Rapport  du  Commissaire  des  Monnaies,  1906,  p.  22. 

i>  Ibid.,  1901,  p.  24. 

cMoniteur  des  Interfets  Mat^riels  du  9  juin,  1907,  p.  1925. 


174 


National       Bank       of      Belgium 

amount.'^  The  changes  in  these  estimates  were  due  to 
the  steady  current  of  metalHc  money  out  of  Belgium  into 
France.  It  was  estimated  by  M.  de  Foville  in  1897,  as 
the  result  of  an  analysis  of  a  count  made  of  different 
forms  of  money  received  by  the  banks,  that  there  were 
then  in  France  329,900,000  francs  in  5-franc  pieces  of 
Belgian  coinage,  of  which  266,300,000  francs  were  in  the 
vaults  of  the  Bank  of  France. ''  As  the  result  of  a  similar 
inquiry  in  1903,  M.  de  Foville  reduced  the  estimate  of 
Belgian  5-franc  pieces  circulating  in  France  to  270,000,000 
francs,  of  which  168,000,000  francs  were  in  the  vaults  of 
the  Bank." 

It  is  these  conditions  with  which  the  Government 
would  have  to  deal  if  the  Latin  Union  were  dissolved.  It 
would  be  impossible  to  absorb  into  the  circulation  of 
Belgium  the  300,000,000  francs  circulating  in  France.  It 
would  be  necessary,  first,  to  find  gold  resources  with 
which  to  liquidate  this  great  obligation  to  the  French 
Government,  and,  secondly,  to  find  a  means  of  disposing 
of  the  1,500  tons  of  silver  coins  which  would  be  surren- 
dered to  Belgium.  In  view  of  the  small  amount  of  coins 
now  in  circulation  in  Belgium,  it  might  be  found  feasible, 
if  the  old  standard  were  maintained,  to  employ  perhaps 
50,000,000  francs  in  replenishing  the  circulation.  This 
would  still  leave,  at  the  lowest  estimate,  from  175,000,000 

a  The  latest  estimate  made  by  the  Mint  Bureau,  in  the  annual  report  for 
1908,  declared  that  by  reason  of  the  adverse  exchange  with  France  the 
actual  circulation  of  5-franc  pieces  did  not  appear  to  exceed  100,000,000  to 
150,000,000  francs. — Economiste  Europ<5en,  May  22,  1909,  XXXV,  p.  644. 

^  L'Economiste  Fran^ais,  February  12,  1898,  p.  202. 

c  Ibid.,  April  23,  1904,  p.  576. 


175 


National     Mo  u  c  t  a  r  y     Co  m  m  is  s  I  on 

to  200,000,000  francs  to  be  thrown  upon  the  silver  market 
if  other  means  could  not  be  found  for  dealing  with  them. 
Obviously,  however  skilfully  this  operation  were  con- 
ducted, it  would  have  a  very  depressing  effect  on  the  market 
for  silver,  which  in  recent  years  has  shown  signs  of  being 
easily  glutted  whenever  the  demand  from  any  important 
source,  like  that  of  India,  has  become  impaired.  Even 
if  the  silver  could,  by  extending  sales  over  a  reasonable 
period  of  time,  be  made  to  fetch  25d.  per  ounce,  there 
would  be  a  loss  of  more  than  one-half  of  the  face  value  of 
the  coins,  which  would  have  to  be  met  by  the  Government 
of  Belgium.  If  this  sum  were  raised  by  means  of  a  gold 
loan,  it  would  require  approximately  100,000,000  francs 
($19,300,000). 

To  cover  this  loss  would  not  be  the  only  problem  in- 
volved in  the  dissolution  of  the  Latin  Union.  The  fact 
that  the  Belgian  5-franc  pieces  were  no  longer  received  in 
France  would  deprive  them  of  the  support  given  to  the 
value  of  silver  coins  in  France  by  the  great  gold  reserve  of 
the  Bank  of  France.  The  limitation  of  the  quantity  kept 
in  circulation  in  Belgium  would  tend  in  some  degree  to 
maintain  the  local  value  of  the  currency;  but,  it  is  con- 
tended by  some  students  of  the  subject,  it  would  be  found 
absolutely  necessary  to  take  measures  also  to  establish  a 
gold  reserve  in  Belgium.  The  amount  required  for  this 
purpose  would,  in  the  opinion  of  M.  Ansiaux,  be  at  least 
100,000,000  francs.  The  National  Bank  would,  in  his 
opinion,  require  the  support  of  its  reserve  in  order  to  be 
prepared  to  redeem  its  notes  in  gold,  which  would  almost 
necessarily  be  the  policy  pursued  during  the  liquidation 
and  retirement  of  the  5-franc  pieces  if  the  security  of  the 

176 


National       Bank       of      Belgium 

bank  notes  and  the  soundness  of  the  monetary  system 
were  not  to  be  put  in  jeopardy." 

As  a  result  of  this  situation  there  would  be  a  double 
liability  to  aid  in  maintaining  the  gold  standard  not  un- 
like that  imposed  upon  the  Government  of  the  United 
States  when  the  silver  circulation  became  excessive  in 
1893.  On  the  one  hand,  the  function  would  rest  upon  the 
Government  of  maintaining  the  parity  of  the  silver  coins 
by  means  of  a  visible  gold  reserve ;  on  the  other  hand,  the 
function  would  rest  upon  the  Bank  of  maintaining  the 
redemption  of  its  notes  in  gold.  Otherwise,  the  dissolu- 
tion of  the  Latin  Union  would  tend  to  produce  a  panic  in 
Belgium  by  reason  of  the  knowledge  that  the  great  mass 
of  Belgian  silver  coins  afloat  in  Europe  could  not  be  ab- 
sorbed into  the  Belgian  circulation  and  would  have  no 
guaranty  of  parity,  except  the  limited  gold  reserve  of  the 
Bank,  which  would  be  far  from  sufficient  to  liquidate  the 
quantity  returning  to  the  country  when  they  ceased  to  be 
legal  or  customary  tender  in  France,  Italy,  or  Switzerland. 

If  the  counsel  of  M.  Fr^re-Orban  in  1885  had  been  fol- 
lowed, Belgium  might  have  reorganized  her  monetary 
system  upon  a  basis  independent  of  that  of  France  at  a 
much  smaller  cost  than  a  few  years  later.  The  average 
quotation  of  silver  for  1885  was  48Y^yd.,  London  price, 
corresponding  to  $1.0651  per  fine  ounce  in  New  York. 
It  was  the  last  time  that  silver  showed  an  average  annual 
price  in  the  American  market  above  $1,  except  in  1890 
under  the  impulse  of  the  purchases  under  the  Sherman 
law.  By  1895  the  London  quotation  showed  an  average 
of  293^d.  and  by  1905  27|^d.     At  the  average  price  of 

a  Les  Problfemes  Actuels,  etc.,  p.  20. 
85519—10 12  177 


National    Monetary     Commission 

1885  the  loss  would  have  been  about  20  per  cent  of  the 
face  value  of  the  coins.  At  the  average  price  for  the  year 
ending  June  30,  1908 — 27.33d. — the  depreciation  was 
nearly  60  per  cent  below  legal  parity. 

If  the  Belgian  Government  could  have  marketed  its 
surplus  silver  as  successfully  after  1885  as  the  German 
Government  did  after  1873,  a  loss  of  20  per  cent  upon 
200,000,000  would  have  been  only  40,000,000  francs 
($7,720,000) .  To  put  in  effect  such  a  proposal  under  pres- 
ent conditions,  however,  even  apart  from  the  effect  which 
it  would  have  in  the  further  demoralization  of  the  silver 
market,  would  involve  a  loss  of  more  than  100,000,000 
francs  ($19,300,000).  The  aggregate  loans  required,  both 
to  cover  this  loss  and  to  provide  an  adequate  gold  re- 
serve, would  be,  according  to  the  estimates  of  M.  Ansi- 
aux,  not  less  than  300,000,000  francs.'^  This  amount, 
imposed  upon  the  present  population  of  Belgium,  which 
is  about  7,200,000,  would  amount  to  about  $8.25  per 
capita  and  would  be  equivalent  to  a  loan  of  $750,000,000 
for  the  90,000,000  people  of  the  United  States.  Obviously 
the  issue  of  a  loan  of  this  magnitude  involves  serious  con- 
siderations, and  it  is  not  surprising  that  the  Belgian  Gov- 
ernment has  preferred  to  continue  a  member  of  the  Latin 
Union,  even  in  the  face  of  continuing  depreciation  in  the 
bulUon  value  of  its  silver  money  and  the  prospect  that 
liquidation  would  be  still  more  difficult  and  costly  if 
undertaken  in  time  to  come. 

A  policy  of  waiting  has  several  compensations.  The 
growth  in  the  population  and  in  the  economic  resources 
of  the  country  tends  to  increase  the  demand  for  currency, 

o  Les  Probl^mes  Actuels,  etc.,  p.  20. 
178 


National       Bank       of      Belgium 

while  the  lapse  of  time  increases  the  extent  of  the  slow 
disappearance  and  absorption  of  the  excess  coins.  A 
special  field  where  this  absorption  may  become  important 
exists  in  the  Kongo,  which  it  is  fervently  wished  in  Belgium 
may  rival  British  India  as  "  a  sink  of  the  precious  metals." 
Thus  far  this  expectation  has  not  been  realized  on  a  large 
scale,  since  a  considerable  proportion  of  the  special  coinage 
of  1,900,000  francs  made  for  the  Kongo  had,  as  recently  as 
1907,  not  been  absorbed.  It  was  suggested,  moreover,  by 
M.  Ansiaux  that  as  the  Kongo  was  not  a  part  of  the  Latin 
Union,  Belgium  might  derive  considerable  advantage  from 
limiting  the  circulation  there  to  Belgian  coins  and  closing 
the  hospitable  door  which  is  now  kept  open  to  the  coins 
of  the  other  countries  of  the  Union. '^  In  monetary  mat- 
ters time  is  usually  a  cure  for  evils  whose  sources  have 
been  suppressed.  The  growth  in  population  and  eco- 
nomic power,  the  disappearance  of  old  coins,  and  perhaps 
a  recovery  in  the  gold  price  of  silver,  may  gradually  im- 
prove the  position  of  Belgium  in  the  Latin  Union  without 
requiring  the  drastic  and  expensive  course  of  liquidation 
of  her  silver  money  held  abroad. 

THE  METAIvIvIC  RESERVE  AND  THE  PREMIUM  ON  EXCHANGE. 

The  question  whether  the  metallic  reserve  of  the  Na- 
tional Bank  of  Belgium  is  adequate  in  amount  and  is 
properly  constituted  has  been  much  debated  in  recent 
years,  as  the  result  of  the  almost  continuous  premium  on 
foreign  exchange.  The  premium  has  usually  kept  within 
the  limits  of  four-tenths  of  i  per  cent  (or,  as  the  French 
express  it,  4  to  the  1,000),  but  this  has  been  above  the 

«  Les  Probl^rnes  Actuels,  etc.,  p.  23. 
179 


National     Monetary     Co  m  m  I  s  s  I  o  n 

point  which  permitted  exports  of  the  silver  5-franc  pieces 
from  Belgium  aiul  would  have  denuded  the  country  of 
everything  but  subsidiary  coin  but  for  the  action  of  the 
Bank  in  purchasing  5-franc  pieces  abroad  to  replenish  its 
reserv'c.  The  resers-e  was  fixed  prior  to  the  revision  of 
the  charter  in  1872  at  25  per  cent  of  obligations  payable 
on  demand,  which  included  bank  notes  and  current  ac- 
counts payable  at  sight.  It  was  increased  after  that  date 
to  one- third,  but  with  authority  to  the  ministry  to  sus- 
pend the  requirement  when  it  might  be  advisable.  From 
the  beginning  of  the  history  of  the  Bank,  however,  it  was 
allowed  to  count  foreign  bills  as  a  part  of  the  reserve. 
The  efifect  has  been  that  while  the  stated  reserve  has  been 
usually  above  35  per  cent,  the  proportion  held  in  coin  has 
come  to  be  less  than  half  of  this  amount.  A  statement  of 
the  character  of  the  demand  liabilities  and  of  the  reserve 
was  made  in  the  replies  of  the  Government  to  the  ques- 
tions of  the  central  section  of  the  Chamber  of  Deputies  at 
the  time  of  the  revision  of  the  charter  in  1900,  which  is 
supplemented  in  the  following  table  by  the  figures  for 
1908 :« 

Proportion  of  reserve  held. 


Dec.  31,  1897. 

Dec.  31,  1908. 

513, 268,900 
93.892.500 

806,878,000 
100,  716,  soo 

Total  obligations  on  demand  -    

607,  i6i,  400 
202,387,  100 

907.594.500 
302.531.500 

Actual  metallic  reserve.    ..    ._      .. 

103, 326, 100 
120, 078, 600 

158, 163, 200 

18s. 540. 900 

223,404.  700 

343.704.100 

"Documents  Parlementaires:    1900,  p.  205. 


180 


National       Bank       of      Belgium 

These  figures  show  a  percentage  of  total  reserve  against 
demand  obhgations  of  about  36.8  per  cent  in  1897  and 
37.8  per  cent  in  1908.  They  also  show  no  radical  change 
in  the  proportion  of  coin  to  foreign  bills.  It  is  noticeable, 
however,  that  the  circulation  has  increased  very  rapidly 
within  the  eleven  years  since  the  report  of  1897.  Upon 
this  subject  more  will  be  said  hereafter. 

In  one  respect  the  movement  of  the  reserve  has,  during 
the  recent  history  of  the  Bank,  been  favorable.  This  is 
in  the  proportion  of  gold  held  as  compared  with  silver. 
In  1875,  immediately  after  the  free  coinage  of  silver  was 
suspended  at  the  Belgian  mint,  the  gold  coin  held  was 
62,508,000  francs,  while  holdings  of  silver  5-franc  pieces 
reached  35,847,000  francs.  Gradually  the  proportion  of 
silver  over  gold  was  reduced,  until  since  1886  the  following 
proportions  have  obtained : 

Composition  of  the  metallic  reserve. 


December  3 1 —                  Gold. 

Silver  s -franc 
pieces. 

Subsidiary  and 
minor  coins. 

Total. 

1887 

Francs. 

58. 768, 200 

81,407,434 

88,823,415 

91, 904, 050 

89.589.  225 

100,  746,035 

103, 871, 160 

106, 707, 910 

112.  436,850 

Francs. 
21.  961.  000 
IS. 743. 735 

8, 903, 640 
I  2, 003, 000 
14,  186,455 

5,426,460 
10,596,675 
19.565.495 
37.032.500 

Francs. 

18, 350, 000 

17. S03. 967 

5.599. lOI 

4.850,059 

10,394.  630 

1 1, 448, 613 

9,717,  292 

6,988,395 

8,693.87s 

Francs. 

1892      

114, 654, 737 

1897-. 

103, 326, 156 

108,  757.  109 

1 17.  63  I ,  :o7 

124. 185, 127 

133. 261, 800 

158, 163, 22s 

The  increase  in  5-franc  pieces  during  the  year  1908  is  not 
in  itself  an  unfavorable  symptom.  Indeed,  under  the  ex- 
isting policy  of  the  Bank  in  dealing  with  the  problem  of 
exchange,  an   adequate   stock  of  silver  5-franc  pieces  is 


181 


National     Monetary     Commission 

nearly  as  important  as  an  adequate  stock  of  gold.  As  gold 
has  practically  disappeared  from  current  use,  and  if  paid 
out  would  be  promptly  seized  upon  by  the  exporters,  the 
amount  held  by  the  Bank  is  to  a  certain  extent  immobi- 
lized and  constitutes  a  guaranty  fund  for  the  solvency  of 
the  Bank's  assets  rather  than  a  part  of  the  active  circula- 
tion. Notes  are  redeemed  principally  in  silver  5 -franc 
pieces,  which  are  more  expensive  than  gold  to  export. 
The  Bank  imports  5 -franc  pieces  at  its  own  expense  when 
the  demands  upon  it  exceed  receipts  of  the  coin.  The 
reflux  of  5-franc  pieces  during  1908  may  be  attributed  in 
part  also  to  the  stagnation  in  general  business,  which  has 
accumulated  coin  and  other  forms  of  currency  in  most  of 
the  great  banks  of  the  world. 

One  of  the  most  difficult  problems  with  which  the  Bank 
of  Belgium  has  had  to  deal  in  recent  years  has  been  the 
unfavorable  state  of  the  exchanges.  The  rate  of  exchange, 
instead  of  fluctuating  between  the  gold  import  and  gold 
export  points  at  different  seasons,  has  remained,  with  only 
brief  and  occasional  exceptions,  adverse  to  Belgium. 
Gold  practically  disappeared  from  circulation  many  years 
ago  and  was  soon  followed  by  the  5-franc  pieces  in  flitting 
across  the  border.  The  profit  in  exporting  the  coins  has 
become  so  obvious,  even  to  those  who  are  not  bankers,  that 
it  is  practiced  by  a  great  number  of  persons,  especially  those 
living  near  the  French  frontier.  The  process  by  which  the 
profit  is  realized  is  thus  described  by  M.  Ansiaux:*^ 

"  The  tactics  of  the  drainers  are  well  known.  They  pro- 
cure pieces  of  5  francs  either  from  the  circulation  or  at  the 

a  Les  Probl^mes  Actuels  de  la  Circulation  Metallique  et  Fiduciaire  en 
Belgique,  p.  25. 

182 


National       Bank       of      Belgium 

counter  of  the  National  Bank  or  from  its  agencies  nearest 
to  the  French  frontier,  in  exchange  for  bank  bills.  They 
ship  these  pieces  to  one  of  the  banking  towns  nearest  to 
our  territory — for  example,  to  Lille.  There  it  is  easy  to 
exchange  them  for  cheques  or  drafts  payable  in  France  or 
(what  comes  to  the  same  thing)  to  deposit  them  in  a  bank- 
ing estabUshment  and  against  the  deposit  to  draw  a  cheque 
of  corresponding  value.  This  paper  is  immediately  nego- 
tiated in  Belgium  at  a  premium  covering  the  cost  of  the 
operation  and  involving  also  a  certain  percentage  of  profit. 
As  this  speculation  is  repeated  indefinitely,  it  affords  in  the 
aggregate  serious  profits  to  him  who  practices  it." 

In  Switzerland,  where  similar  conditions  prevailed  prior 
to  the  creation  of  the  National  Swiss  Bank  in  1907,  the 
trade  of  exporting  the  coins  was  shared  even  by  women, 
who,  while  waiting  in  fine  to  convert  notes  into  coin  at 
banking  offices  near  the  frontier,  carried  their  knitting  or 
weaving,  combining  with  their  profitable  operations  in 
finance  their  occupations  as  keepers  of  the  home. 

An  indication  of  the  growth  in  the  tendency  to  export 
coin  is  afforded  by  the  figures  of  the  presentation  of  notes 
to  the  bank  to  obtain  specie  in  contrast  with  the  specie 
presented  to  obtain  notes.  Within  the  short  interval  since 
1891 ,  the  notes  thus  presented  for  exchange  have  increased 
by  nearly  100  per  cent,  or  in  about  the  same  proportion  as 
the  average  circulation.  This  movement  might  be  con- 
sidered a  healthy  indication  of  the  rapidity  of  note  redemp- 
tion, but  for  the  fact  that  the  demand  for  coin  in  exchange 
for  notes  converges  principally  upon  those  branches  of 
the  bank  which  are  near  the  French  frontier  or  in  direct 
railway  communication  with    France.      It   is  significant 

183 


National     Monetary     Co  mm  is s  i o  n 


also  that  the  total  presentation  of  bills  for  notes  is  much 
larger  at  the  country  branches  of  the  Bank  than  at  Ant- 
werp or  Brussels.  The  little  frontier  town  of  Charleroi, 
with  a  population  in  1906  of  27,362,  showed  in  1908  pres- 
entations of  notes  to  the  amount  of  65,525,000  francs 
($12,650,000),  or  twice  the  amount  recorded  at  Antwerp 
and  only  2,328,000  francs  less  than  Brussels,  with  its  popu- 
lation of  more  than  600,000.  The  following  table  shows 
the  movement  in  presenting  bills  for  coin  at  the  agencies, 
at  Antwerp  and  at  Brussels,  and  the  totals  of  this  move- 
ment and  of  the  presentation  of  coin  to  obtain  notes : 

Exchanges  of  notes  and  coin. 
[In  thousands  of  francs.] 


1892 
1897 
1900 
1901 
1902 
1903 
1904 
190S 
1906 
1907 
1908 


Notes  presented  for  coin. 


At  agen- 
cies. 


IS7. 716 
190, 879 
241. 30s 
218,48s 
225,842 
237, 145 
229, 268 
232,  1 16 
266, 672 
298, 260 
282, 417 


At  Ant- 
werp. 


At  Brus- 
sels. 


Total. 


IS 

889 

38, 

538 

22 

356 

43 

978 

27 

764 

S3 

213 

28 

543 

SS 

781 

29 

302 

49 

934 

24 

548 

50 

263 

25 

366 

SI 

091 

24 

523 

SS 

170 

30 

981 

70 

368 

35 

SS4 

69 

529 

32 

829 

67 

8S3 

Total  coin 
presented 
for  notes. 


212, 143 
257. 213 
322, 282 
302, 809 
305. 078 
311.956 
30s. 725 
311,  809 
368, 021 
403.343 
383.099 


44.525 
57.288 
63.892 
64. 803 
68,813 
69,  116 
68,537 
72.350 
72,793 
77.947 
79,337 


A  still  more  concrete  demonstration  of  the  character 
of  this  demand  for  coin  is  afforded  in  the  table  below. 
Nine  agencies,  most  of  them  of  relatively  small  importance 
in  commercial  transactions,  represented  in  1908  consid- 
erably more  than  half  the  total  exchanges  of  notes,  more 
than  two-thirds  of  the  exchanges  outside  of  Antwerp  and 
Brussels,  and  twice  the  combined  exchanges  of  the  latter 

184 


National       Bank       of      Belgium 

two  chief  offices  of  the  Bank,  where  56  per  cent  of  the 
discount  business  is  done: 

Exchanges  of  notes  at  frontier  agencies. 


Agency. 


1892. 


1908. 


Charleroi 

Courtrai 

Ghent 

La  Louviere . 

Liege 

Mons 

Namur 

Tonrnai 

Verviers 


Francs. 

42,  02s,  000 

6. 292, 000 

8,815. °oo 

7, 144, 000 

26, 145, 000 

1 1, 493, 000 

4, 754. 000 

3. 610. 000 

7.  979. 000 


Francs. 

69.89    ,000 

7.  562,  000 

19, 665, 000 

10, 416. 000 

36,  594.  000 

20,  349,  000 

3, 525, 000 

5, 128, 000 

7,  831,  000 


Francs. 

65,  525.000 

5.985.000 

28, 625, 000 

34,663,000 

32,  800,  000 

27, 982, 000 

9,  477,  000 

7, 647, 000 

8, 665, 000 


The  exchanges  in  a  country  having  a  sound  currency 
are  afifected  by  the  ultimate  balance  in  transfers  of  capital 
and  credit.  More  obvious  factors  may  be  found  in  the 
state  of  the  circulation,  the  proportion  of  metallic  reserves 
held,  and  rates  of  discount.  In  the  case  of  Belgium,  it  is 
admitted  that  the  balance  of  the  merchandise  movement 
is  adverse,  but  this  is  only  one  of  the  many  factors  in  the 
movements  of  capital  and  credit.  It  is  contended  that 
Belgium  exports  a  large  amount  of  capital  to  countries 
less  advanced  than  herself,  like  Egypt,  China,  and  South 
America.  These  investments  are  accomplished  usually 
by  drafts  upon  Paris.  As  one  of  the  chief  centers  of  the 
international  exchanges,  Paris  naturally  serves  as  the 
intermediary  for  the  transfer  of  Belgian  funds.  To  Swiss 
investors  also  the  Paris  market  stands  in  substantially  the 
same  relation,  and  when,  after  1901,  French  capital  began 
to  go  to  Switzerland,  the  balance  of  the  exchanges  was  for 
a  time  reversed 


185 


N a  t  i  0  }i  a  I     Monetary     Co  m  m  is  s  i o  n 

One  of  the  most  obvious  reasons  for  the  disappearance 
from  Belgium  of  gold  at  least  has  been  the  increase  in  the 
employment  of  small  notes.  It  is  a  well-established  prin- 
ciple, illustrated  by  the  monetary  experience  of  many 
countries,  that  notes  will  drive  coin  out  of  circulation 
down  to  the  lowest  denomination  for  which  they  are 
issued.  In  other  words,  notes  of  20  francs  ($3.86),  which 
is  the  minimum  denomination  in  Belgium,  if  issued  in 
sufficient  amounts,  would  inevitably  expel  from  circula- 
tion gold  coins  of  20  francs  and  of  higher  denominations. 
During  the  early  history  of  the  National  Bank  the  issues 
of  notes  of  the  lower  denominations  were  comparatively 
restricted.  Since  1895,  however,  there  have  been  striking 
changes  in  the  character  of  the  note  issues,  independ- 
ently of  their  amount.  The  notes  of  the  larger  denomi- 
nations— 500  francs  ($96.50)  and  1,000  francs  ($193) — 
have  increased  only  by  an  amount  of  83,000,000  francs 
($16,000,000),  while  the  total  circulation  has  increased  by 
302,600,000  francs  ($58,400,000).  Notes  of  the  minimum 
denomination  of  20  francs  have  nearly  trebled  in  amount, 
and  those  for  50  francs  ($9.65)  and  100  francs  ($19.30) 
have  increased  by  about  135,000,000  francs.  Undoubt- 
edly a  proportion  of  this  increased  demand  for  small  notes 
is  due  to  the  expansion  of  business  and  the  more  general 
use  of  currency  by  the  poorer  classes,  but  a  large  part  of 
the  increase  may  reasonably  be  connected  with  the  dis- 
appearance of  the  5-franc  pieces.  The  following  table 
puts  in  graphic  form  the  changes  in  the  denominations  of 
notes  in  circulation  for  representative  years: 


186 


National      Bank       of      Belgium 


Increase  in  issues  of  small  notes. 
[In  thousands  of  francs.] 


Total  aver- 
age circu- 
lation. 


1880 
1890 
1895 
1900 
90s 
1908 


313,624.5 
382.309.  6 
450.413-  I 
576, 483- S 
676,  841.  9 
7S3. 079.9 


Notes  of 
1,000  and 
Soo  francs. 

Notes  of 

100  and  so 

francs. 

151.539.5 

147. 224.3 

143,694.0 

200,  824.  s 

149.647.5 

235,686.5 

201,045-  5 

287,  902.  8 

222, 269. 5 

337,  146.  I 

232,413.0 

371,306.6 

Notes  of 
20  francs. 


14,  860.  7 
37.791-2 
52.079-  I 
87.535.1 
117,  426.3 
149.360.3 


The  influence  of  the  great  increase  in  circulation  has 
obviously  been  to  expel  coin  and  to  make  it  practically 
impoesible  to  maintain  the  coins  of  full  legal  tender 
capacity  in  circulation.  The  issue  of  notes  down  to  so 
low  a  denomination  as  20  francs  has  practically  imposed 
upon  the  Bank  the  obligation  of  maintaining  the  coin 
reserve  of  the  country.  In  this  respect  it  is  perhaps  sub- 
ject to  criticism  for  permitting  so  considerable  a  propor- 
tion of  the  reserve  to  consist  in  foreign  bills — not  that  the 
bills  are  not  a  sound  and  efficient  portion  of  the  reserve, 
but  that  the  proportion  of  metal  has  been  allowed  to  fall 
too  low.  Upon  this  point  emphasis  is  laid  by  the  venerable 
Prof.  Georges  de  Laveleye,  in  a  recent  discussion  of  the 
relative  increase  in  the  bank-note  circulation  of  France 
and  Belgium.  In  France  as  in  Belgium,  he  declared,  the 
circulation  of  bills  goes  on  steadily  increasing.  If  the 
years  1891-1892  are  compared  with  1906-1907,  the  circu- 
lation advanced  from  425,000,000  to  750,000,000  francs  in 
Belgium  and  from  3,000,000,000  to  4,800,000,000  francs  in 
France.     It  increased    75   per   cent  in    Belgium  and   60 


187 


National     Monetary     Commission 

per  cent  in  France.  Commenting  upon  these  figures, 
Professor  de  Laveleye  declares :  "■ 

"  But  in  France  it  is  the  reserve  which  has  profited  by 
this  extension  of  the  paper  circulation,  while  in  Belgium 
it  is  the  assets  in  Belgian  and  foreign  paper  which  have 
increased  from  300,000,000  to  625,000,000  francs — that  is, 
in  a  proportion  exactly  parallel  to  the  increase  in  the  cir- 
culation. That  has  happened,  then,  which  must  inevitably 
happen — the  bill  of  the  National  Bank  of  Belgium  has  only 
the  strict  minimum  of  legal  metallic  protection,  even 
accepting  the  assets  in  foreign  bills  as  the  equivalent  of 
specie  in  the  vaults,  while  the  bill  of  the  Bank  of  France 
shows  such  an  increase  of  protection  that  it  might  be  truly 
said  that  it  represents  gold  circulating  in  the  form  of 
paper." 

As  influential,  perhaps,  as  permanent  transfers  of 
capital,  and  perhaps  one  of  their  causes,  is  the  compara- 
tively low  rate  of  discount  maintained  at  the  National 
Bank  and  in  Belgium.  On  this  point  an  indictment  is 
drawn  by  M.  Ansiaux,  both  against  the  policy  of  the  Bank 
and  against  the  law  which  covers  into  the  public  Treasury 
the  proceeds  of  all  discounts  above  3K  per  cent.  In  seek- 
ing to  reach  the  foundation  of  the  problem,  M.  Ansiaux 
declares  that  it  is  an  error  to  believe  that  the  balance  of 
international  accounts  redresses  itself  always  automat- 
ically. "Without  doubt,"  he  says,  "the  rise  of  exchange 
constitutes  a  stimulus  to  exportation  and  a  curb  to  impor- 
tation. In  short,  exporters  sell  their  drafts  higher  and 
importers  pay  more  for  their  remittances.  But  the  cus- 
toms statistics  have  already  demonstrated  that  this  double 

"  Moniteur  des  Int^rfits  Matdriels,  December  8,  1907,  p.  3974. 


National      Bank       of      B  e  I  g  i 


u  m 


influence  does  not  translate  itself  in  an  obvious  manner  in 
the  commercial  movements  of  Belgium  and  Switzerland.'^ 

Through  its  holdings  of  foreign  bills  the  National  Bank 
has  been  able  to  offset  in  some  measure  the  adverse  tend- 
ency of  the  exchanges.  When  the  demand  for  the  Paris 
cheque  becomes  pressing  and  threatens  to  raise  the  pre- 
mium to  a  point  which  would  attract  attention  and  cause 
alarm,  the  Bank  draws  from  its  portfolio  and  throws  upon 
the  market  drafts  upon  Paris,  London,  Berlin,  and  Amster- 
dam, and  thus  meets  the  demand  for  the  transfer  of  funds 
abroad.  This  portfolio  of  foreign  paper  is  reconstituted 
from  time  to  time,  at  those  periods  when  the  demand  for 
foreign  exchange  is  less  acute. 

It  is  contended  by  some  of  the  critics  of  the  Bank,  how- 
ever, that  while  its  policy  in  dealing  with  foreign  bills  is 
sound  so  far  as  it  goes,  it  should  be  combined  with  a  more 
resolute  policy  in  regard  to  the  discount  rate.  It  is 
pointed  out  that  the  Imperial  Bank  of  Germany,  which 
also  employs  foreign  bills  to  maintain  the  balance  of  the 
exchanges,  does  not  on  this  account  consider  itself  released 
from  the  obligation  of  raising  the  discoimt  rate  boldly  and 
in  defiance  of  all  criticisms.  In  other  markets  the  eleva- 
tion of  the  rate  of  discount  is  relied  upon  to  correct  the 
adverse  balance  of  the  exchanges  and  check  the  outflow  of 
metallic  money.  It  becomes  a  question  then — which  has 
been  much  discussed  in  Belgium — whether  the  National 
Bank  has  not  erred  in  keeping  its  rate  of  discount  too  low, 
instead  of  too  high.  There  have  been  those  who  have 
urged  that  it  should  be  advanced  sharply  and  kept  high 
until  a  visible  influence  was  exerted  upon  the  movement 


«  Les  Problferaes  Actuels,  etc.,  p.  35. 
189 


National    Monetary     Commission 

of  money.  The  failure  of  the  National  Bank  to  do  this 
might  be  attributed  to  two  influences — the  fact  that  by- 
law it  is  deprived  of  profit  from  a  discount  rate  above  3^ 
per  cent  and  the  fact  that  it  derives  a  very  considerable 
profit  from  the  expansion  of  its  note  issue,  which  has  taken 
the  place  of  the  vanished  coins.  Obviously  the  profits 
upon  the  note  issue  more  than  compensate  the  premiums 
paid  for  maintaining  the  metalhc  reserve.  The  Bank  per- 
haps regards  this  policy  as  more  beneficial  to  commercial 
interests  and  less  likely  to  impair  its  own  popularity  than 
the  drastic  elevation  of  the  discount  rate  which  protects 
the  reserve  of  the  Bank  of  England. 

In  spite  of  the  unfavorable  situation  of  the  Belgian 
exchange,  which  is  emphasized  by  the  dubious  position  of 
Belgium  in  the  Latin  Union,  the  argument  is  not  without 
support  by  competent  economists,  that  the  existing  sys- 
tem has  advantages  over  the  resolute  raising  of  the  dis- 
count rate  which  is  advocated  by  M.  Ansiaux.  The  argu- 
ment is  the  same  as  that  made  in  favor  of  a  uniform  rate 
at  the  Bank  of  France — that  the  burden  of  maintaining 
the  reserve  is  properly  assumed  by  the  Bank,  rather  than 
imposed  upon  the  commerce  of  the  country.  It  appears 
that  the  periods  w^hen  high  discount  rates  have  prevailed 
have  been  usually  those  when  the  bank  found  it  necessary 
to  make  the  largest  importations  of  coin,  but  in  most  of 
these  cases  the  discount  rate  was  not  raised  so  radically 
as  at  the  Imperial  Bank  of  Germany  and  other  state  banks 
outside  of  France.  Thus,  in  1898,  with  an  average  dis- 
count rate  of  3.04  per  cent,  the  amount  of  coin  brought 
into  the  country  by  the  Bank  was  30,000,000  francs.  In 
1899,  with  an  average  rate  of  3.91  per  cent,  the  amount 


190 


National      Bank       of      Belgium 

brought  in  was  60,000,000  francs.  When  the  average  rate 
fell  in  1902  to  3  per  cent,  the  importations  of  coin  by  the 
Bank  were  only  11,000,000  francs,  but  rose,  under  the  in- 
fluence of  the  tight  money  market  of  1906  and  an  average 
discount  rate  of  3.84  per  cent,  to  81,500,000  francs;  and 
in  1907,  with  an  average  discount  rate  of  4.95  per  cent, 
importations  of  coin  by  the  Bank  were  98,500,000  francs. *» 
With  an  average  rate  of  3.56  per  cent  in  1908,  importa- 
tions by  the  Bank  fell  to  79,000,000  francs.  ^ 

It  is  maintained  by  the  principal  financial  publication 
of  Belgium  that  an  attempt  to  raise  the  discount  rate 
radically  would  impose  much  heavier  charges  upon  the 
country  than  are  imposed  under  the  existing  system.  The 
increase  of  the  rate  from  an  average  of  3.84  per  cent,  which 
prevailed  in  1906,  to  an  average  of  5  per  cent  would  add 
5,166,000  francs  to  the  discount  charges  of  the  National 
Bank  alone,  and  if  the  entire  quantity  of  bills  discounted 
at  the  joint-stock  banks  were  subjected  to  the  same  increase 
of  rate  the  total  additional  charge  imposed  upon  com- 
merce would  be  multiplied  about  three  times  and  would 
amount  to  more  than  15,000,000  francs.  The  effect  upon 
the  security  market  would  be  to  depress  prices  and  to 
send  the  3  per  cent  obligations  of  the  Belgian  Government 
below  par.  In  other  words,  it  was  declared,  the  rental  of 
capital  would  be  brought  up  to  the  rate  which  is  paid  in 
undeveloped  countries  deficient  in  resources  or  unhealthy 
in  their  economic  state. *= 

Upon  the  whole,  therefore,  it  is  concluded  by  the  Bel- 
gian journal  that  comparatively  little  injury  results  to  the 

o  Moniteur  des  Int^rfits  Mat^riels,  June  21,  1908,  p.  2035. 
6Economiste  Europden,  May  22,  1909,  XXXV,  p.  644. 
c  Moniteur  des  Int(^rfits  Matc^riels,  December  22,  1907,  p.  4142. 

191 


National    Monetary     Commission 

financial  organism  of  the  country  from  the  premium  on 
exchange.  The  computed  amount  of  the  premium  on 
exchange  paid  upon  exportations  to  France,  at  the  rate 
of  three-tenths  of  i  per  cent,  represents  upon  400,000,000 
francs  of  such  exportations  a  sum  of  1,200,000  francs 
($231,600)."  It  is  obvious  that  this  enhanced  price  of 
the  Paris  exchange  affords  to  the  merchant  drawing  upon 
Paris  a  premium  upon  exportation  or  imposes  upon  the 
importer  an  enhanced  burden  which  is  too  shght  in  either 
case  to  affect  seriously  the  balance  of  trade  by  stimulat- 
ing exportation  or  checking  the  importation  of  French 
products.  Trade  would  almost  certainly  be  influenced 
more  sharply  by  an  elevation  of  the  discount  rate,  but  it 
would  be  necessary  ultimately  for  the  Bank  to  strengthen 
its  reserve  from  the  increased  quantity  of  gold  imported 
or  to  curtail  the  amount  of  small  notes  in  circulation  in 
order  to  make  the  increased  rate  of  discount  effective  in 
keeping  gold  within  the  country. 

GENERAIv  STATISTICS   OF   BANKING   OPERATIONS. 

Some  of  the  principal  statistics  of  the  movement  of 
important  classes  of  business  from  the  beginning  of  the 
life  of  the  National  Bank  are  brought  together  in  the  tables 
below.  As  statistics  for  representative  years  have  been 
presented  in  most  cases  in  discussing  different  features  in 
the  operation  of  the  Bank,  comment  in  detail  upon  the 
statistics  here  presented  is  not  required.  They  are  brought 
together  for  convenience  and  a  greater  degree  of  complete- 
ness than  the  shorter  tables  which  have  been  given  in 
dealing  with  particular   subjects.     The  complete   tables 

o  Moniteur  des  Int^r^ts  Materials,  December  15,  1907,  p.  4058. 

192 


National       Bank       of      Belgium 

show  the  rapid  expansion  in  the  business  of  the  National 
Bank  of  Belgium,  which  has  been  characteristic  of  finan- 
cial statistics  in  the  case  of  advanced  commercial  coun- 
tries during  the  past  generation.  The  four  principal  items 
for  the  close  of  each  year  conform  to  the  exhibit  made  by- 
similar  figures  in  other  countries  of  Europe  "for  the  cen- 
tral banks  of  issue,  in  the  fact  that  note  circulation  plays 
a  much  more  important  part  than  deposits  in  gross 
liabilities  and  that  the  growth  in  circulation  is  offset  by 
a  corresponding  growth  in  discounts  granted.  These  dis- 
counts, however,  are  made  up  largely  of  rediscounts  ex- 
tended to  the  joint-stock  and  private  banks,  which  have 
absorbed  the  bulk  of  the  growth  in  deposit  business  since 
the  evolution  of  powerful  banks  without  the  power  of  note 
issue.  A  general  table  of  the  four  principal  items  of  the 
balance  sheet  at  the  end  of  the  year  appears  below: 

Principal  items  of  the  balance  sheet. 


December  31 — 


Metallic 
reserve. 


1851- 
i8ss- 
1860. 
1861. 
i86a. 
1863- 
1864. 
i86s- 
1866. 
1867- 
1868. 
1869. 
1870. 
1871. 
1872- 
1873- 


Francs. 
29, 264, 880 
59,  099.  781 
63.023.53s 
69,  048,  286 
68,  299,  840 
45.  119.  295 
51,352.  022 
55. 074. 197 
55. 453. 861 
79.931.  106 
90,911,301 
90,  097,  697 
95.614.523 
123, 271, 268 
115,670,473 
105.493. 284 

1874 j   n8,  246,897  j 

1875 122,662,123 


Discounts. 

Francs. 
44.034,  953 
78,504,  789 
155.958.  745 
149,  568,487 
144.775.678 
137.432.  729 
128, 901, 020 
ISS.563.372 
145, 226,443 
167. 576, 272 
203,813, 192 
230,  190,  917 
196,  233,878 
214, 290, 183 
305.635,514 
258,451, 264 
272, 087, 466 
269, 071, 451 


Bank  notes  in 
circulation. 


Francs. 
SO, 346, 210 
95.580,880 
117. 899, 960 
117, 847, 920 
112,  474,  420 
1 16,  727,  840 

I  12,  651,  990 
125, 106, 120 
124.387.380 
137,  660,450 
171,  782,  680 
199.  219.390 
202,  528.  520 
228.  690,  490 
297, 672, 650 
320.  586,070 
328,873,430 
340,254.420 


Creditor  cur- 
rent accounts. 


Francs. 
25,980,830 
42,666,838 
81,825, 144 
79. 173. 174 
67,852,803 
42,635,776 
44, 207, 136 
64, loi, 720 

55, 798, 121 

94. 270, 253 
113, 271. IS* 
102, 116, 333 
81.319.921 
106, to6, 831 
1 18,  052,  607 
61,82a,  909 
71.465.  293 
65.704.557 


85519—10- 


-13 


193 


National     Monetary     Commission 

Principal  items  of  the  bakmce  slieet — Continued. 


December  31 — 


1876. 
1877- 
1878. 
1879- 
1880. 
1881. 
1882. 
1883- 
1884. 
i88s- 
1886. 
1887- 
1888. 
1889. 
1890. 
1891- 
1892- 
1893- 
1894- 
189s- 
1896. 
1897. 
1898. 
1899- 
1900- 
1901. 
1902. 
1903. 
1904- 
190S- 
1906. 
1907- 
1908. 


Metallic 
reserve. 


Discounts. 


Francs. 

116.675.643   1 

99. 249, 880 

99.  169,  614    I 

105,415.039 

98. 787, 206 

99.477.283    I 

99.  445.996    j 

98,  096,  713 

96,533.498 

105,495.925 

100. 578, 722 

99.079.959 

93.646    434 

103,636,  140 

103.413.340 

102.  751,  759 

114,654.  737 

III, 621, 199 

130,  756.  51S 

loi, 061 , 507 

loi,  978,  446 

103,326, 156 

117, 087, 292 

107,901,447 

108, 757, 109 

116, 153, 170 

114, 170,310 

117.  117.388 

119.366,357 

117, 621, 107 

124, 185, 127 

133,  261, 800 

158,  163,  225 


Francs. 
306. 821, 721 
276,556. 761 
247,  872,  60s 
271. 512. 573 
283, 992, 826 
280,695,884 
256,854,  173 
271,  250,  I  76 
280, 026, 058 
278,295,964 
292,  662,  882 
295. 117. 351 

283,875,995 
302,384,547 

312,  670,  661 

323,986,  582 
309.391.  70s 
336,  201,077 
346,  S90,  227 
365, 263, 291 
399.  683,424 
417,827,  791 
424.  795.032 
433. 577.079 
465, 244, 299 
478,293,671 
513.750,490 
533.069,957 
557.740,495 
570,024,  215 
597.370,467 
528.316,  117 
493.458,291 


Bank  notes  in 
circulation. 


Francs. 
364.559,260 
342,  108,340 
313.617.950 
334.975. 720 
339.969.510 
354.  753.670 
355,706,250 
357, 611, 140 
3S7.  761,810 
367,423,810 
378,  966,  160 
389, 094. 020 
375,670, 220 
401, 765, 820 
404, 721, 600 
421, 886, 510 
427.594.580 
450. 755.910 
469, 662, 000 
476, 502, 020 
492,  636,  910 
513,  268,950 
544,652,040 
589, 504. 170 
631,  631,  800 
649.330.330 
676, 140,330 
671,  006,  560 
694, 429, 290 
724, 082, 140 
770,423.340 
798,  167,  760 
806,878,060 


Creditor  cur- 
rent accounts. 


Francs. 
76, 276, 824 
58.787.160 
60,274,577 
74.376,  704 
72,  142,  896 
76,889,811 
69,  618,318 
79,  611,  77a 
73.950,390 
71,071,  23S 
74.377.927 
71,507,414 

66,  282,  970 

67,  090,444 
67.  723.926 
69.363.48s 
69.340.318 
67.353.628 
78,558,169 
72, 103, 788 
90, 649, 788 
93.892.s14 
98,975. 211 
88,  765, 140 
81,  7S4.  197 
89,513,811 
78,854,638 
86,  971,  009 
93.374.  199 
98.615.552 
95,  128,921 
87.573.812 

100. 716. sss 


The  figures  of  the  general  movement  of  operations  show 
immense  totals,  because  they  cover  all  payments  into 
and  out  of  the  Bank.  Figures  of  this  movement  are  not 
usualb/  kept  by  American  banks,  but  they  have  a  certain 
significance  in  the  case  of  European  banks  of  issue  because 
the  latter  perform  to  some  extent  the  function  of  the  clear- 


194 


National      Bank       of      B  e  I  g  i  u 


m 


ing  houses  in  receiving  and  collecting  checks  and  other 
documents  upon  other  banks. 

General  movement  of  operations  and  gross  earnings. 


Francs 
4,  8io,  si6, 
5,031,817, 
II,  700,  891, 
872 i      13.  03s.  434. 


869. 
870. 
871- 


Movement  of 
operations. 


873- 
874. 
87s- 
876. 
877- 
878. 


1879- 
1880. 
i88i. 
i882_ 
1883- 
1884. 
1885. 
1886. 
1887- 


1889. 
1890. 
1891- 
1892- 
1893- 
1894. 
189s- 
1896. 
1897- 


1899. 
1900. 
1901. 
1903. 


Total  for  10  years  . 


Total  for  10  years  . 


Total  for  10  years. 


14,426,450, 
13.574,856. 
13.527.359. 
12,489,  767, 
11,444.063, 
II,  566,  641, 


589- 68 
891.  19 
702.  01 
872.44 
646.88 
891.54 
459.  17 
081. 18 
172.  91 
67397 


III, 607, 799, 980. 97 


13,268,345,510.98 
i6,  770,  452,  220.85 
i6, 691, 220, 278. 75 
16, 815, 897, 966. 40 
17.988,680,  750.85 
16,473.  764,339-  29 
15.969.846,  743- 08 
16,  410,  293, 424. 86 
19,  151.684.378.81 
18,  822,  634,  841.  64 


Gross  earnings. 


Francs. 
5.995,353.30 
7,046,  729.  48 

8,798.931.35 
10,  210, 076. 49 
16,542,873.03 
13.613,941.  19 
11,365,899.9s 
10,315,566.65 
10, 476, 216. 88 
II. 295.546. 19 


105,661,  134.  51 


168,362,820,455.  51 


19.  230, 
19,  601, 
19.925. 
18,864, 
19, 084, 
19.  562, 
25.521, 
23.  794. 
23.880, 
28, 195, 


169,  638.  25 
550,644.65 
688, 020. 47 
409.343-  24 
647.081.  43 
149.358.05 
039, 223.47 
145.  713.99 
970, 766. 75 
808, 124. 09 


217,660,  577.914.39 


29.837.  546,  658.  48 
31.490,349,019.45 

31.  745.527.  179-  18 

32,  179,  503.  131.05 


9,  817,  772.  17 

9.854.985-36 
11,522.499.39 

13. 781, 016. 79 
12,  176,985.53 
11.072,438.  so 
II. 114, 498. 40 

10,  894. 625. 98 

11.  202. 106. 98 
10,  723.509.  19 


112,  160.  427.  40 


11.947.  140.  IS 
12,344,883.  28 
1 1,  402,  406.  98 

10,  789,  230.  85 
I  I.  203,  819.  79 
11,470,305.  74 

11.  203.  777.50 
II.  730,  218.  22 
12,665.355-05 
13.005, 476. 81 


117,  761.614.37 


14.909.364-85 
17.585. 180. 25 
17.332,074.  69 
16.663.898.82 


195 


National     Monetary     Commission 


General  movement  of  operations  and  gross  earnings — Continued. 


Francs. 
35, i6o, 961, 766. 78 
36,  085,  207,044.  18 
40, 424, 814, 815.  19 
45.034.519.641.  00 

1907 I  SI,  162,  602,  291.  58 

1908 50,804,771,498.  54 


1903- 
1904- 
190S- 
1906. 


Movement  of 
operations. 


Total  for  10  years 383,925,  802,035.  43 


Gross  earnings. 

Francs . 

18.  298,  521.  90 
18,395.  748.40 
18,498.899.98 

19.  704.409.03 
21, 122, 923. so 
20.639,024.  59 


183,  149, 046. 01 


The  character  and  frequency  of  changes  in  the  rate  of 
discount  have  been  discussed  under  appropriate  heads,  but 
a  convenient  summary  of  the  average  rate  for  each  year 
since  1873,  giving  the  volume  of  discounts  and  the  amount 
earned  from  them,  is  afforded  in  the  next  table: 

Rate  and  amount  of  discounts. 


1873 
1874 
1875 
1876 
1877 
1878 
1879 
1880 
1881 
1882 
1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 
1891 


Rate  of 
discount. 

Average 
maturity 
of  paper. 

Amount  dis- 
counted. 

Gross  pro- 
ceeds of 
discount. 

Per  cent. 

Francs. 

Francs. 

5  06 

47 

2,  019.  300,  000 

14.598.300 

4.37 

50 

I,  907.  500,  000 

II, 105. 900 

3-8s| 

SO^ 

I. 916, 900. 000 

9,  189, 600 

2.75 

50 

I,  822,  200,  000 

7,859.600 

2.69 

SiJS 

1.  894,  200, 000 

8,  206, 900 

3-21 

SI 

I.  829,  600.  000 

8. 540. 600 

.3-04 

47 

I.  923,  SCO, 000 

7.  009.  600 

3-35 

46 

I.  994.  600.  000 

7.  096.  200 

4.08 

47 

2,  034,  200, 000 

8.577.700 

4.42ji 

45 

2.059.  100,  000 

9.977.  200 

3    60 

44y' 

2  012.  400.  000 

8.367.300 

332 

45 

2.  071.  700.  000 

7.537.300 

3.28 

45 

2. 088, 600, 000 

7.503.700 

2.80 

47 

2  059.300.000 

6.  707.  700 

3.10 

47 

2, 153, 800. 000 

7.  593.  200 

332 

45 

2.  167,  300,  000 

7.  566.  000 

3.58^ 

45 

2.  228,  100, 000 

8,573.500 

3-22 

44 

2.355.  500.000 

9.  244. 000 

3   00 

39 

2.512,  800,  000 

8.344.500 

196 


Nat 


t  0  n 


a  I      Bank       of      B  e  I  g  i  u 


m 


Rate  and  amoutit  of  discounts — Continued. 


Rate  of 
discount. 


Average 
maturity 
of  paper. 


Amount  dis- 
counted. 


Gross  pro- 
ceeds of 
discount. 


1893 
1894 
189s 
1896 
1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 
190S 
1906 
1907 
1908. 


Per  cent. 

2.  70 
2.83 

3.  00 
2.  60 
2.84 

•      3-00 

3  04 
392 

4  09 
3. 28 
3-  00 
3-  17 
3-  00 
3-  17 
3- 84 
4-95 
3-56 


41 
40 
40 
39 

41 
40 
41 
39 
38 
41 


Francs. 
2,430,500. 
2,  463,  600, 
2,  546,  200, 
2,894,  300, 
2.  785,  600, 

2,  922,  200, 

3,  026, 900, 
3,  242, 200, 
3,  442. 800, 
3,370,800, 
3.428,  900, 
3.635,300, 
3, 603, 100, 
3, 861, 900, 
4.255.500. 
4.449.  700. 
4,362,  400, 


000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 
000 


Francs. 

6,  526 , 500 
7.349. 700 

7,  231.300 
6, 814. 800 

8,  001,  200 
9.394.  900 
9.585.300 

10.  592. 500 
12, 921 , 000 
12,  792, 200 
12,  271, 000 
14.376. 200 
14, 418. 700 
14.  507.  lOO 
15.312.  200 
15.829.300 
15.389.800 


197 


APPENDICES. 


lyq 


Appendix  A. 
THE  EXCHANGE  PROBLEM  IN  BELGIUM. 

(From  the  New  York  Bankers'  Magazine  for  August,  1909.) 

The  annual  report  of  the  director  of  the  mint  of  Bel- 
gium, of  which  an  abstract  appears  in  L'E^conomiste  Euro- 
peen  of  May  22,  throws  considerable  light  on  the  problem 
of  the  adverse  exchange  with  France,  in  addition  to  the 
facts  presented  in  the  annual  report  of  the  National  Bank 
of  Belgium.  It  appears  that  the  purchases  of  5-franc 
pieces,  forced  upon  the  Bank  in  order  to  maintain  the 
redemption  of  its  notes  and  the  integrity  of  the  circula- 
tion, were  not  as  large  in  1908  as  in  1907,  but  were  larger 
than  in  any  other  year  except  1906.  As  recently  as  1904, 
when  the  discount  rate  was  low,  the  Bank  was  compelled 
to  buy  in  Paris  only  12,000,000  francs  in  silver  pieces, 
which  was  a  marked  improvement  over  1899  and  1900, 
when  the  money  market  was  under  severe  pressure.  The 
purchases  made  by  the  Bank  in  1900  were  35,500,000 
francs.  The  record  of  the  past  eight  years,  with  the  aver- 
age rate  of  discount  at  the  National  Bank,  appears 
below : 


1 90 1 

1902 

1903 

1904 

1905 - 

1 906 — 

1907 

1908 

201 


vSilvcr  pur- 
chased by 
the   Bank. 

Average 

rate  of 

discount. 

FraTics. 

Per  cent. 

14, 500,000 

3.28 

1 1, 000, 000 

3    00 

35, 000, 000 

3.  17 

la,  000.000 

3    00 

34, 000, 000 

3    >7 

81. 500, 000 

3.84 

98. 500,000 

4    95 

79, 000, 000 

3.56 

N  a  1 1  0  }i  a  I     Monetary     Commission 

The  mint  report  is  interesting  in  submitting  a  new 
estimate  of  the  quantity  of  5-franc  pieces  still  in  circula- 
tion in  Belgium.  It  is  estimated  that  more  than  three- 
fourths  of  the  pieces  coined  under  Leopold  I,  prior  to 
1867,  have  disappeared  and  that  of  the  entire  coinage  of 
495,678,210  francs  from  1832  to  1876  (when  coinage  was 
suspended)  only  about  375,000,000  francs  are  still  in 
existence.  The  circulation  of  these  pieces  in  Belgium, 
which  was  formerly  calculated  at  200,000,000  francs,  is 
believed  to  have  been  so  reduced  by  exportation  to 
France  that  the  amount  remaining  in  circulation  does 
not  exceed  100,000,000  to  150,000,000  francs.  It  is 
declared  that  exchange  on  Paris  has  been  unfavorable, 
as  in  preceding  years.  The  premium,  which  fell  below  i 
per  1,000  in  January  and  February,  1908,  rose  progress- 
ively to  4  per  1 ,000  in  November,  to  return  to  3  per  i  ,000 
in  December.  The  average  for  the  year  was  2^.  The 
effect  of  the  premium  was  to  encourage  the  exportation 
not  only  of  the  5-franc  pieces,  but  even  of  subsidiary  sil- 
ver. The  Government  and  the  National  Bank  have  both 
taken  measures  to  hamper  this  flight  of  ciurency.  The 
railway  officials  have  taken  steps  to  prevent  important 
transfers  of  silver  in  the  form  of  ordinary  baggage,  and 
ticket  sellers  and  treasury  officials  have  been  forbidden 
to  make  exchanges  of  money  except  within  normal  limits. 
The  Bank  has  endeavored  to  meet  the  legitimate  demand 
for  exchange  by  its  offerings  of  foreign  bills. 


Appendix  B. 

THE     FUNDAMENTAL     LAWS     CREATING     AND 
EXTENDLNG  THE  CHARTER  OF  THE  BANK. 

Laws  of  May  5,  1850;  May  20, 1872;  and  March  26, 1900, 
combined  according  to  a  royal  decree  of  May  7,  1900. 
(Moniteur  of  August  18,  No.  230.) 

Article  L'^ 

A  bank  is  hereby  founded  under  the  name  of  National 
Bank  of  Belgium,  with  head  office  in  Brussels. 

Article  II.'' 

The  Bank  shall  establish  discount  offices  in  capitals  of 
provinces,  and  also  in  towns  where  the  need  of  them  shall 
be  manifest. 

A  discount  committee  shall  be  connected  with  each 

discount  office  in  towns  where  deemed  necessary  by  the 

Government,  after  having  consulted  the  directors  of  the 

Bank. 

Article  III." 

The  corporate  existence  of  the  Bank  is  extended  to 
January  i,  1929.  This  term  may  be  extended  by  law, 
upon  the  request  of  a  majority  of  a  meeting  of  share- 
holders. 

»  Article  I  of  the  law  of  March  26,  1900. 
b  From  the  law  of  May  5,  1850. 

c  Article  III  of  the  law  of  May  5,  1850;  Article  I,  part  i,  of  the  law  of 
May  20,  1872;  Article  II,  part  2,  of  the  law  of  March  26,  1900. 

203 


National     Monetary     Commission 

Article  IV." 

The  capital   of  the    Bank   shall   be   50,000,000  francs, 

divided   into   50,000  shares,   registered   or   to   bearer,   of 

1 ,000  francs  each. 

Article  V.'' 

The  Bank  shall  begin  business  when  three-fifths  of  each 
share  shall  have  been  paid  in. 

The  administration  of  the  Bank  shall  cause  the  capital 
to  be  restored  up  to  15,000,000  francs,  if  it  should  be 
impared  by  losses. 

The  administration  is  empowered  to  call  up  funds  if 
business  expansion  should  require  it. 

The  mode  and  conditions  of  payment  shall  be  regu- 
lated by  the  statutes. 

The  Bank  shall  collect  interest  at  the  rate  of  3  per 
cent  per  annum  on  the  amounts  not  paid  in. 

Article  VI.' 

A  reserve  fund  shall  be  created  for  the  following  pur- 
poses : 

1.  To  meet  losses  in  the  Bank's  capital. 

2.  To  add  a  sufficient  amount  to  the  yearly  profits  to 
allow  the  payment  of  a  dividend  of  4  per  cent  on  the 
amount  paid  in. 

The  amount  set  aside  to  constitute  the  reserve  fund 
shall  be  10  per  cent  of  the  annual  profits  in  excess  of  4 
per  cent  of  the  capital. 

"  Article  IV  of  the  law  of  May  5,  1850,  reads  as  follows:  "The  corporate 
capital  is  25,000,000  francs,  divided  into  25,000  shares,  registered  or  to 
bearer,  of  1,000  francs  each."  And  Article  I,  part  2,  of  the  law  of  May  20, 
1872,  states:  "The  Bank's  capital  shall  be  increased  to  50,000,000  francs." 

^From  the  law  of  May  5,  1850,  which  has  since  become  inoperative. 

c  Article  III  of  the  law  of  March  26,  1900. 

204 


National       Bank       of      Belgium 

Article  VII.'* 

One-quarter  of  the  profits  in  excess  of  4  per  cent  is 
assigned  to  the  Government.  The  Government  shall, 
moreover,  receive  an  allowance  of  one-quarter  of  i  per 
cent  semiannually  on  the  average  circulation  of  notes  in 
excess  of  275,000,000  francs. 

Article  VII  (2).'' 

The  profit  accruing  to  the  Bank  from  the  difference 
between  an  interest  rate  of  33^  per  cent  and  the  rate  of 
interest  actually  collected  shall  be  assigned  to  the  State. 

Article  VIII." 

The  operations  of  the  Bank  shall  be  as  follows: 

1.  To  discount  or  purchase  bills  of  exchange  and  other 
documents  resulting  from  commercial  transactions,  and 
treasury  bonds  within  the  limits  to  be  determined  by  the 
statutes. 

The  following  are  deemed  commercial  transactions  for 
the  purposes  of  this  provision:  Purchases  and  sales  by 
farmers,  and  to  them,  of  cattle,  agricultural  implements, 
fertilizers,  seed,  crops,  and  generally  of  merchandise  and 
produce  relating  to  the  practice  of  their  industry. 

2.  To  deal  in  gold  and  silver  bullion. 

3.  To  make  loans  on  gold  and  silver  bars  and  coin. 

4.  To  undertake  the  collection  of  bills  which  may  be 
remitted  to  it  by  private  individuals  or  corporations. 

5.  To  receive  sums  of  money  on  deposit  in  current  ac- 
count, and  securities,  precious  metals,  and  gold  and  silver 
coin  for  safe-keeping. 

a  Article  II,  third  paragraph,  of  the  law  of  March  26,  1900. 
b  Article  II,  fourth  paragraph,  of  the  law  of  March  26,  1900. 
c  Article  VIII  of  the  law  of  May  5,  1850   and  Article  XI  of  the  law  of 
March  26,  1900. 

205 


National     Monetary     Commission 

6.  Finally,  to  make  advances  on  current  account  or  for 
short  terms  upon  the  deposit  of  national  public  securities 
or  other  securities  guaranteed  by  the  State,  within  limits 
and  conditions  to  be  determined  periodically  by  the  ad- 
ministration of  the  Bank,  jointly  with  the  council  of  cen- 
sors, with  the  approval  of  the  Minister  of  Finance. 

Article  IX/' 

The  Bank  is  expressly  prohibited  from  undertaking  op- 
erations other  than  those  set  forth  in  Article  VIII. 

The  Bank  shall  not  be  permitted  to  borrow,  nor  to  make 
loans,  either  on  bonds  and  mortgages  or  upon  the  deposit 
of  industrial  shares. 

It  shall  not  make  loans  on  its  own  shares,  nor  buy  them. 

It  shall  not  take  any  part,  either  directly  or  indirectly, 
in  industrial  enterprises,  or  undertake  any  kind  of  business 
other  than  that  set  forth  in  paragraph  2  of  the  preceding 
article. 

It  shall  not  acquire  real  estate  other  than  the  premises 
which  are  absolutely  necessary  for  carrying  on  its  business. 

Article  X.'' 

The  Bank  shall  act  as  cashier  for  the  State  under  condi- 
tions to  be  determined  by  law. 

Article  XI. 

If  a  savings  bank  shall  be  established,''  the  Government 
reserves  the  right  to  have  it  managed  by  the  Bank.     This 

a  From  the  law  of  May  5,  1850. 

b  The  law  of  March  16,  1865,  created  a  general  savings  and  pension  office 
under  the  guaranty  of  the  State.  Article  39  of  said  law  reads  as  follows: 
"  The  relations  between  the  savings  bank  and  the  National  Bank  shall  be 
regulated  by  the  Government,  in  accordance  with  Article  XI  of  the  law  of 
May  5,  18.50." 

206 


National      Bank      of      Belgium 

service  shall  be  distinct  and  independent  from  the  business 

of  the  Bank,  and  its  organization  shall  be  the  subject  of  a 

law. 

Article  XII. 

The  Bank  may  issue  notes  payable  to  bearer.  The 
amount  in  circulation  shall  be  represented  by  securities 
which  can  be  easily  converted  into  cash. 

The  proportion  between  the  cash  reserve  and  the  notes 
in  circulation  shall  be  fixed  by  the  statutes. 

Article  XIII." 

The  Government,  by  agreement  with  the  Bank,  shall 
determine  the  form  of  the  notes,  the  method  of  their  issue, 
and  the  amount  of  each  denomination. 

The  text  of  those  which  shall  be  issued  in  the  future  '' 
shall  be  expressed  in  the  two  official  languages. 

Article  XIII  (2).'^ 

Within  one  month  following  the  promulgation  of  the 
present  law,"^  the  Bank  shall  pay  into  the  public  treasury 
the  value  of  the  bank  notes  belonging  to  the  issues  prior 
to  the  year  1869,  which  have  not  yet  been  presented  for 
redemption. 

Whenever  a  type  of  bank  note  shall  be  replaced  or 
abolished,  the  Bank,  at  the  expiration  of  a  period  fixed 
in  each  case  by  special  agreement,  shall  pay  into  the 
treasury  the  value  of  the  notes  of  that  type  which  shall 
not  have  been  presented  for  redemption. 

a  Article  XIII  of  the  law  of  May  5,  1850,  and  Article  V  of  the  law  of 

March  26,  1900. 

b  Beginning  March  26,  1900. 

c  Article  VI  of  the  law  of  March  26,  1900. 

^  Law  of  March  26,  1900. 

207 


National     Monetary     Commission 

This  provision  shall  be  applicable  to  the  notes  of  20 
francs  of  the  type  prior  to  that  created  in  1897. 

The  notes  of  which  the  equivalent  shall  have  been  paid 
into  the  treasury  shall  be  deducted  from  the  amount  of 
the  outstanding  circulation,  and  the  redemption  of  such 
notes  as  shall  be  subsequently  presented  at  the  counters 
of  the  Bank  shall  be  made  on  account  of  the  treasury. 

Article  XIV." 

The  notes  shall  be  payable  at  sight  at  the  offices  of  the 
Bank  in  Brussels. 

The  notes  shall  be  payable  at  sight  at  the  country- 
agencies  of  the  bank,  but  such  payments  may  be  deferred 
until  there  has  been  time  to  receive  the  necessary  funds. 

The  Government  is  authorized  to  receive  the  notes  at 
state  offices.* 

Article  XV.  <= 

To  facilitate  transfers  of  funds,  the  Bank  is  authori/ed 
to  issue  drafts  payable  several  days  after  sight. 

Article  XVI. <^ 

The  Bank  may  be  authorized  by  the  Government  to 
purchase  public  securities,  but  shall  not  hold  an  amount 
exceeding  the  amount  of  its  paid-up  capital. 

a  Article  XIV  of  the  law  of  May  5,  1850,  and  Article  I,  paragraph  5, 
of  the  law  of  May  20,  1872. 

&  Law  of  June  20,  1873,  Article  VI:  "Notes  of  the  National  Bank  are 
legal  tender  so  long  as  they  are  redeemable  at  sight  in  legal  coin."  This 
privilege  would  immediately  cease  should  the  notes  of  the  National  Bank 
be  refused  at  the  state  offices. 

c  From  the  law  of  May  5,  1850. 

^  Article  XVI  of  the  law  of  May  5,  1850,  and  Article  I,  paragraph  6,  of 
the  law  of  May  20,  1872. 

208 


National       Bank       of      Belgium 

No  purchase  shall  be  made  except  by  virtue  of  au- 
thority given  by  the  Minister  of  Finance,  on  application 
of  the  administration  of  the  Bank,  approved  by  the  council 
of  censors . 

The  investment  of  the  reserve  in  public  funds  shall  be 
discretionary. 

Article  XVII. 

The  management  of  the  Bank  shall  be  in  the  hands  of 
a  governor  and  six  directors. 

Article  XVIII. 

There  shall  be  also  a  council  of  censors  and  a  committee 
of  discount. 

Article  XIX. 

The  governor  shall  be  appointed  by  the  King  for  five 
years.  While  holding  that  office  he  can  not  be  a  member 
of  either  branch  of  the  Legislature  nor  receive  any  pension 
from  the  State. 

A  member  of  cither  House,  when  appointed  governor, 
terminates  immediately  his  legislative  functions  upon 
his  acceptance  of  the  office. 

The  governor,  if  elected  a  member  of  cither  House,  shall 
not  be  permitted  to  take  the  oath  as  such  until  he  has 
formally  declared  his  preference  for  the  latter  office. 

Article  XX. 

The  directors  and  the  censors  shall  l)e  elected  by  the 
general  assembly  of  the  shareholders. 

The  duration  of  office  for  directors  and  censors,  and 
the  order  of  rotation,  shall  be  regulated  by  the  statutes. 

85.519 — 10 14  J09 


National     Monetary     Commission 


Article  XXI." 

A  commissioner  shall  be  appointed  by  the  Government 
to  super^'isc  operations,  and  especially  discount  and  the 
issue  of  notes.  His  salary  shall  be  fixed  by  the  Govern- 
ment by  agreement  with  the  management  of  the  Bank, 
and  shall  be  paid  by  the  Bank. 

Article  XXII. 

The  management  of  the  Bank  shall  present  to  the  Gov- 
ernment monthly  a  statement  showing  the  condition  of 
the  institution  and  of  its  discount  offices.  This  state- 
ment shall  be  published  monthly  in  the  Moniteur.'' 

The  result  of  operations  and  the  declaration  of  divi- 
dends shall  be  published  every  six  months  in  the  same 

way. 

Article  XXIII.  = 

Changes  made  in  the  statutes  of  the  Bank  must  be  in 
accordance  with  the  principles  set  forth  in  the  present 
law.** 

Changes  may  be  made  on  other  points  not  regulated 
by  law.  They  shall  be  submitted  to  the  King  for  his 
approval. 

Article  XXIV. 

The  Government  has  the  right  to  control  all  operations. 
It  shall  have  the  power  to  prevent  the  execution  of  any 


a  From  the  law  of  May  5,  1850. 

6  In  pursuance  of  Article  47  of  the  new  by-laws,  the  publication  takes 
place  weekly. 

c  Article  VIII  of  the  law  of  March  26,  1900. 

d  The  first  statutes  of  the  Bank  were  promulgated  in  pursuance  of 
Article  XXIII  of  the  law  of  May  5,  1850,  and  modified  in  accordance  with 
the  law  of  May  20,  1872,  Article  III. 


National      Bank      of      Belgium 

measure  which  shall  be  contrary  to  the  law,  to  the  stat- 
utes, or  to  the  interests  of  the  State. 

Article  XXV. 

No  bank  of  issue  shall  be  constituted  by  shares,  except 
under  the  form  of  a  joint  stock  company  and  by  virtue 
of  a  law. 

Article  XXVI. « 

The  National  Bank  and  its  branches,  discount  offices, 
and  agencies  shall  conform  to  the  provisions  of  the  law 
of  May  22,  1878,  concerning  the  use  of  the  Flemish 
language  in  official  matters;  and  this  provision  shall 
apply  to  all  blank  forms  and  to  signs  on  the  exterior 
and  interior  of  buildings. 

An  adequate  knowledge  of  both  languages  shall  be 
required  of  all  employees  to  be  chosen  in  future  for  serv- 
ice in  Flemish  districts,  including  that  of  Brussels,  who 
come  in  contact  with  the  public. 

Temporary  Provision.'' 

The  present  law  shall  take  effect  from  the  ist  of  Jan- 
uary, 1900.  However,  the  benefits  prescribed  in  favor 
of  the  State  are  to  take  effect  from  the  ist  of  January 
preceding. 

The  Bank  is  authorized  to  pay  out  of  its  reserve  funds 
the  difference  between  the  amount  due  the  State  in  pur- 
suance of  the  preceding  paragraph,  and  the  amount 
already  paid  into  the  treasury  in  accordance  with  the 
provisions  in  force  on  December  31,  1899.     The  amount 

o  Article  VII  of  the  law  of  March  26,  1900. 
ft  Article  X  of  the  law  of  March  26,  1900. 


National     Monetary     Commission 

of  such  difTerencc  shall  be  restored  to  the  reserve  by  means 
of  assessments  on  the  prolits  in  future  years. 

Noted  and  approved,  to  be  added  to  our  decree  of  Aug- 
ust 7,  1900. 

Leopold. 
By  the  King : 

P.  DE  Smet  de  Naeyer, 

Minister  of  Finance  and  Public  Works. 


Appendix  C. 

LAW  REGULATING  THE  FUNCTIONS  OF  CASHIER 
FOR  THE  STATE. 

Laws  of  May  lo,  1850,  May  20,  1872,  and  March  26, 
1900,  consolidated  in  pursuance  of  royal  decree  of  August 
7,  1900.     (Moniteur  of  August  18,  No.  230.) 

Article  I.'' 

The  Government  is  authorized  to  intrust  to  the  National 
Bank  of  Belgium  the  functions  of  cashier  for  the  State. 

Article  II." 

As  such,  the  Bank  is  deemed  to  be  accountant  for  the 
State,  and  subject  to  all  regulations  prescribed  by  law 
regarding  accounting  and  by  the  fundamental  law  of  the 
court  of  accounts,  which  are  not  inconsistent  with  the 
principles  governing  stock  companies. 

Article  III." 

The  Bank  shall  estabUsh  an  agency  in  the  capital  of 
each  judicial  district,  and  also  in  such  towns  as  the  Gov- 
ernment shall  deem  advisable  in  the  interest  of  the  treasury 
or  of  the  public. 

Article  IV.° 

The  Bank  is  accountable  for  its  administration  and  that 
of  its  agents.     Exception  shall  be  made  only  in  cases  of 

«  From  the  law  of  May  lo,  1850. 


National     Monetary     Commission 

superior  force,  the  existence  of  which  and  the  use  of  funds 

collected  for  account  of  the  State  shall  have  been  clearly 

established. 

Article  V.« 

Agents  of  the  Bank  shall  be  appointed  by  the  King  from 
a  Ust  of  candidates  presented  by  the  council  of  adminis- 
tration of  the  Bank  containing  twice  as  many  names  as 
there  are  agents  to  be  appointed. 

They  shall  not  be  entitled  to  claim  a  pension  from  the 
treasury.  They  shall  furnish  a  bond  to  the  cashier  for 
the  faithful  performance  of  their  duties,  consisting  of 
either  real  estate  or  national  bonds. 

Article  VI.'' 

The  journals  ^nd  other  registers  relating  to  operations 
for  the  treasury  shall  be  kept  in  accordance  with  a  method 
to  be  determined  by  the  Government.  The  journals  shall 
be  numbered  and  initialed  by  a  member  of  the  court  of 
accounts. 

The  agents  of  the  Bank  shall  permit  the  vaults,  regis- 
ters, and  journals  to  be  examined  by  the  officials  appointed 
for  that  purpose  by  the  Minister  of  Finance. 

Article  VII.'' 

The  National  Bank  shall  perform  gratuitously  the  serv- 
ice of  cashier  for  the  State. 

The  Bank  shall  bear  all  expenses  of  m&nagement,  of 
material,  of  transportation,  and  of  transfer  of  funds,  and 
shall  share  in  the  expenses  of  the  treasury  in  the  Prov- 


o  From  the  law  of  May  lo,  1850. 

b  Article  IV  of  the  law  of  May  20,  1872,  and  Article  II,  paragraph  5  of 
the  law  of  March  26,  1900. 

214 


National       Bank       of      Belgium 

inces  to  an  amount  of  230,000  francs  annually.  This 
amount  shall  not  be  increased  at  the  revision  of  the  con- 
vention provided  for  by  Article  IX  of  this  act. 

The  available  funds  of  the  treasury  in  excess  of  require- 
ments shall  be  invested  by  the  Bank  in  commercial  paper. 
The  Bank  shall  be  guarantor  for  the  securities  acquired 
or  set  aside  for  account  of  the  treasury. 

Article  VIII." 

The  provisions  of  the  lav/  of  September  5-15,  1807, 
regulating  the  privilege  and  legal  lien  of  the  public  treas- 
ury on  the  estates  of  accountants,  shall  apply  to  the  cashier 
for  the  State. 

ArticIvE  IX.'' 

-  The  agreement  entered  into  between  the  Government 
and  the  Bank  is  subject  to  revision  every  ten  years. 

Noted  and  approved,  to  be  added  to  our  decree  of  August 
7,  1900. 

Leopold. 
By  the  King: 

P.  DE  Smet  de  Naeyer, 
Minister  of  Finance  and  Public  Works. 

o  From  the  law  of  May  10,  1850. 

&  Article  IV  of  the  law  of  March  26,  1900. 


2»5 


Appendix  D. 

STATUTES  OF  TPIE  BANK. 

Adopted  at  the  general  assembly  of  shareholders  of 
May  5,  1900,  and  approved  by  royal  decree  of  May  16, 
1900.     (Moniteur  of  May  24,  1900,  No.  144.) 

Chapter  I. — Organization. 

Article  i.  The  National  Bank  of  Belgium,  founded 
as  a  joint  stock  company,  in  pursuance  of  the  law  of  May 
5,  1850,  and  the  laws  of  May  20,  1872,  and  March  26, 
1900,  shall  have  its  head  office  in  Brussels. 

Art.  2.  It  shall  have  branches  or  discount  offices  in 
the  provincial  capitals  and  in  other  towns,  where  the  need 
of  such  establishments  is  recognized. 

Art.  3.  The  Bank  shall  open  an  agency  in  the  capital 
of  each  judicial  district,  and  also  in  such  towns  as  the 
Government  shall  deem  advisable  in  the  interest  of  the 
treasury  or  of  the  public. 

Art.  4.  The  corporate  existence  of  the  Bank  is  extended 
to  January  i,  1929,  in  pursuance  of  the  law  of  March  26, 
1900. 

This  term  may  be  extended  by  law,  upon  the  request  of 
a  majority  of  the  general  assembly  of  shareholders. 

Art.  5.  The  Bank  shall  be  legally  liquidated  should 
losses  shown  by  the  balance  sheet  exceed  one-half  the 
corporate  capital. 

In  any  other  case,  the  Hquidation  can  not  take  place 
before  the  time  fixed  by  law,  except  with  the  consent  of 

216 


National      Bank      of      Belgium 

the  Government  and  in  pursuance  of  a  resolution  carried 
by  a  majority  of  three-quarters  of  the  shareholders  in 
general  assembly  and  owning  at  least  one-half  the  stock 
of  the  Bank, 

In  case  of  dissolution,  either  at  the  end  of  the  term  or 
before  the  term,  the  assembly  shall  elect  the  liquidators 
and  regulate  their  powers,  as  well  as  the  mode  of  pro- 
cedure, according  to  common  law. 

Chapter  II. — Capital  and  reserve. 

Art.  6.  The  joint  capital  consists  of  50,000,000  francs, 
divided  into  50,000  shares  of  i  ,000  francs  each. 

Art.  7.  Each  share  shall  give  the  right  to  a  propor- 
tionate and  equal  part  in  the  joint  assets  and  in  the 
division  of  profits. 

Art.  8.  The  rights  and  obligations  pertaining  to  each 
share  follow  the  title  to  same,  to  whomsoever  it  may  pass. 

Shares  can  not  be  divided  as  far  as  concerns  the  Bank; 
it  recognizes  but  one  owner  for  each  share. 

Art.  9.  The  ownership  of  a  share  involves  compliance 
with  the  statutes  of  the  Bank  and  with  decisions  regu- 
larly taken  at  a  general  assembly. 

Art.  10.  The  heirs  or  creditors  of  a  shareholder  can 
neither  cause  official  seals  to  be  affixed  on  the  chattels 
and  securities  of  the  Bank,  nor  ask  distribution  or  sale 
at  auction,  nor  meddle  with  its  management. 

For  the  assertion  of  their  rights,  they  must  abide  by 
the  published  reports  of  the  Bank  and  the  deliberations 
of  the  general  assembly. 

Art.   II.  Fully  paid  shares  are  either  registered  or  to 

bearer,  and  may  be  converted,  free  of  charge,  at  (Ik-  ])leus- 

ure  of  the  owner, 

217 


National     Monetary     Commission 

Art.  12.  The  o\vnership  of  a  registered  share  is  estab- 
lished by  the  entry  on  the  records  of  the  Bank. 

Registers  to  that  effect  are  kept  in  duphcate  at  the  head 
office.  The  beneficiary  receives  a  certificate  which  is 
not  transferable. 

Art.  13.  The  transfer  of  registered  shares  is  effected 
by  means  of  a  declaration  of  transfer  entered  on  the  books 
of  the  Bank,  dated  and  signed  by  the  assignor  and  the 
assignee,  or  their  attorneys  in  fact,  as  well  as  by  a  director 
and  a  clerk  of  the  Bank. 

Art.  14.  The  transfer  of  shares  to  bearer  is  effected  by 
the  delivery  of  the  certificate. 

Art.  15.  Shareholders  are  not  liable  beyond  the  loss  of 
the  amount  of  their  shares  in  the  Bank. 

Art.  16.  A  reserve  fund  shall  be  created,  for  the  fol- 
lowing purposes: 

1.  To  meet  losses  in  the  capital. 

2.  To  add  to  the  yearly  profits  a  sufficient  amount  to 
insure  a  dividend  of  4  per  cent  on  the  nominal  capital. 

Art.  17.  The  amount  set  aside  for  the  formation  of  the 
reserve  shall  be  10  per  cent  of  the  net  profits  in  excess  of 
4  per  cent  per  annum. 

Art.  18.  The  mode  of  investing  the  reserve  shall  be 
discretionary.  The  income  shall  form  part  of  the  general 
earnings  of  the  Bank. 

Chapter  III. — Operations. 

Art.  19.  The  operations  of  the  Bank  shall  be  as  follows: 
I .  To  discount  or  purchase  bills  of  exchange  and  other 

documents    resulting   from    commercial    transactions,    as 

well  as  treasiuy  bonds. 

218 


National       Bank       of      Belgium 

The  following  are  deemed  commercial  transactions  for 
the  purposes  of  this  provision:  Purchases  and  sales  by 
farmers,  and  to  them,  of  cattle,  agricultural  implements, 
fertilizers,  seed,  crops,  and  generally  of  merchandise  and 
produce  relating  to  the  practice  of  their  industry. 

2.  To  deal  in  gold  and  silver  bullion. 

3.  To  make  loans  on  gold  and  silver  bars  and  coin. 

4.  To  undertake  the  collection  of  bills  which  may  be 
remitted  to  it  by  private  individuals  or  corporations. 

5.  To  receive  sums  of  money  on  deposit  in  current 
account,  and  securities,  precious  metals,  and  gold  and  sil- 
ver coin  for  safe-keeping. 

6.  Finally,  to  make  advances  on  current  account  or 
for  short  terms  upon  the  deposit  of  national  public 
securities  or  other  securities  guaranteed  by  the  State, 
within  limits  and  conditions  to  be  determined  periodically 
by  the  council  of  administration,  jointly  with  tlje  council 
of  censors,  with  the  approval  of  the  Minister  of  Finance. 

Art.  20.  The  Bank  is  expressly  prohibited  from  under- 
taking operations  other  than  those  set  forth  in  the  pre- 
ceding article. 

The  Bank  shall  not  borrow  nor  make  loans,  either  on 
bonds  and  mortgages  or  against  the  deposit  of  industrial 
shares  and  bonds. 

It  shall  not  make  loans  on  its  own  shares  nor  buy  them. 

It  shall  not  take  any  part,  either  directly  or  indirectly, 
in  industrial  or  commercial  enterprises  or  undertake  any 
other  form  of  commerce  than  dealing  in  gold  and  silver 
bullion. 

It  shall  not  acquire  real  estate  other  than  the  premises 
which  are  absolutely  necessary  for  carrying  on  its  business. 

219 


National     M  o  ii  c  t  a  ?'  y     Commission 

Art.  2 1 .  Only  such  commercial  bills  shall  be  discounted 
as  are  made  payable  to  order,  stamped,  resulting  from  a 
genuine  business  transaction,  having  not  more  than  one 
hundred  days  to  run  and  guaranteed  by  three  solvent 
signatures. 

However,  commercial  bills  with  two  signatures  may  be 
admitted  in  such  cases,  manner,  and  conditions  as  may 
be  determined  by  regulations  adopted  by  the  general 
council  and  approved  by  the  Minister  of  Finance. 

A  pledge  of  warehouse  receipts,  merchandise,  or  public 
funds  of  sufficient  value  to  guarantee  the  total  of  the 
claim  may  take  the  place  of  one  signature. 

Art.  22.  The  maturity  of  treasury  bonds  admitted  for 
discount  shall  not  exceed  one  hundred  days.  The  rate 
of  discount  shall  be  fixed  by  mutual  agreement  with  the 
Minister  of  Finance. 

Art.  23.  The  Bank  shall  not  carry  in  its  assets  dis- 
counted treastny  bonds  for  more  than  20,000,000  francs. 

Art.  24.  The  rate  of  discount  for  Brussels,  as  well  as 
for  the  discount  offices,  and  the  amount  of  treasury 
bonds  to  be  admitted  to  discount  shall  be  fixed  weekly. 

The  rate  may  be  changed  in  the  meantime. 

Art.  25.  The  amount  and  the  rate  for  loans  to  be  made 
upon  deposits  of  national  bonds,  treasury  bonds,  and 
other  securities  guaranteed  by  the  State  shall  be  deter- 
mined every  week. 

Such  loans  can  be  made  only  to  solvent  parties  and 
for  a  period  not  exceeding  four  months. 

Securities  shall  not  be  accepted  as  collateral  for  more 
than  four-fifths  of  their  value  at  the  market  rate.  • 

The  securities  pledged  shall  be  sold  at  the  Bourse,  if 
the  loans  are  not  repaid  at  maturity.     Not  more  than 


National       Bank       of      Belgium 

one  renewal  shall  be  permitted,  except  by  special  per- 
mission granted  by  the  comicil  of  administration. 

Art.  26.  The  Bank  may  be  authorized  by  the  Gov- 
ernment to  purchase  public  securities,  including  treasury 
bonds,  but  not  for  an  amount  exceeding  the  paid-up  capital 
of  the  Bank. 

No  purchase  shall  be  made  except  with  the  permission 
of  the  Minister  of  Finance,  upon  application  of  the  man- 
agement, approved  by  the  council  of  censors. 

Such  permission  shall  be  applicable  specifically  to  each 
transaction  and  shall  be  considered  void  if  not  used 
within  the  month. 

Art.  27.  The  Bank  may  issue  notes  to  bearer. 

The  amount  of  notes  in  circulation  must  be  represented 
by  securities  which  can  be  easily  converted  into  cash. 

Art.  28.  The  Government,  by  agreement  with  the 
Bank,  determines  the  form  of  the  notes  and  the  method 
of  their  issue.  It  fixes  the  quantity  of  notes  of  denomi- 
nations below  50  francs,  and  determines,  by  agreement 
with  the  Bank,  the  quantity  of  notes  of  the  denomina- 
tion of  50  francs  and  above. 

Art.  29.  The  text  of  the  notes  to  be  issued  in  future 
shall  be  expressed  in  the  two  official  languages. 

The  Bank  shall  conform  to  the  provisions  of  Article  VII 
of  the  law  of  March  26,  1900,  concerning  the  use  of  the 
Flemish  language. 

Art.  30,  The  notes  shall  be  payable  at  sight  at  the 
offices  of  the  Bank  in  Brussels  and  at  its  agencies  in  the 
country.  Payment  at  the  agencies  may,  however,  be 
deferred  until  there  has  been  time  to  receive  the  necessary 
funds. 

221 


National     Monetary     Commission 

Art.  31.  These  notes  shall  continue  to  be  received  in 
payments  at  state  offices. 

The  authority  given  by  virtue  of  Article  XIV  of  the 
law  of  May  5,  1850,  is  subject  to  repeal. 

Art.  32.  Whenever  a  type  of  bank  note  shall  be  re- 
placed or  abolished,  the  Bank,  at  the  expiration  of  a  period 
fixed  in  each  case  by  special  agreement,  shall  pay  into  the 
treasury  the  value  of  the  notes  of  that  type  which  shall 
not  have  been  presented  for  redemption. 

This  provision  shall  be  applicable  to  notes  of  20  francs 
of  the  type  prior  to  that  created  in  1897. 

Art.  33.  The  notes  of  which  the  equivalent  shall  have 
been  paid  into  the  treasury  shall  be  deducted  from  the 
amourit  of  the  outstanding  circulation,  and  the  redemp- 
tion of  such  notes  as  shall  be  subsequently  presented  at 
the  counters  of  the  Bank  shall  be  made  on  account  of  the 
treasury. 

The  amount  thereof  shall  be  collected  from  the  treas- 
ury at  the  end  of  each  half  year. 

Art.  34.  The  Bank  is  required  to  have  a  metallic 
reserve  equal  to  one-third  of  the  amount  of  its  notes  and 
other  liabilities  payable  at  sight. 

The  reserve  shall  be  permitted,  however,  to  fall  below 
one-third  under  circumstances  and  within  limits  which 
shall  be  sanctioned  by  the  Minister  of  Finance. 

Art.  35.  To  facilitate  transfers  of  funds,  the  Bank 
may  issue  transfer  orders  or  drafts  payable  at  sight  or 
at  not  exceeding  seven  days'  sight,  bank  notes  to  order, 
or  checks  accepted  and  certified  payable  by  the  Bank. 

It  may  cooperate  in  creating  and  managing  clearing 
houses. 


National       Bank       of      Belgium 

The  obligations  issued  in  pursuance  of  the  present 
article  shall  be  recorded  on  a  separate  account  in  the 
statement  of  condition. 

Art.  36.  The  Bank  has  the  privilege  of  issuing  certifi- 
cates for  the  amounts  entered  to  its  credit  on  the  ledger 
of  the  public  debt. 

Art.  37.  The  Bank  shall  perform  gratuitously  the 
sers^ice  of  cashier  for  the  State. 

It  shall  bear  all  expenses  of  management,  of  mate- 
rial, of  transportation,  and  of  insurance  and  transfers  of 
funds  and  securities,  and  shall  share  in  the  expenses  of 
the  treasury  in  the  provinces  to  an  amount  of  230,000 
francs  annually.  This  amount  shall  not  be  increased  at 
the  revision  of  the  convention  provided  by  Article  IX 
of  the  law  of  May  10,  1850,  as  modified  by  Article  IV  of 
the  law  of  March  26,  1900. 

Available  treasury  funds  in  excess  of  current  require- 
ments shall  be  invested  by  the  Bank  in  commercial  paper; 
it  shall  be  responsible  for  the  paper  purchased  or  set 
aside  for  the  account  of  the  treasury. 

Art.  38.  The  Bank  attends  to  the  operation  of  the  gen- 
eral savings  bank  and  pension  fund  founded  under  the 
guaranty  of  the  State  by  the  law  of  March  16,  1865. 

The  temporary  investment  of  the  assets  of  that  fund, 
as  well  as  the  conversion  of  the  same  into  cash,  is  made 
by  the  Bank,  which,  for  these  operations,  keeps  accounts 
and  records  separate  from  its  own. 

Deposits  for  account  of  this  fund  are  received  and 
reimbursed  at  all  the  agencies  of  the  Bank. 

Art.  39.  The  Bank  may  accept  in  the  character  of 
collateral,    mortgage,    or   transfer   real    estate   or    other 

223 


National     Monetary     Commission 

chattels  as  security  for  credits  which  are  doubtful  or  in 
suspense. 

Such  real  estate  or  chattels  shall  be  disposed  of  within 
t\vo  years,  unless  the  Minister  of  Finance  grants  a  longer 
term. 

Art.  40.  The  Bank  undertakes  to  furnish  safe-deposit 
vaults  free  of  charge  for  sealed  deposits  made  by  recog- 
nized mutual  benefit  societies,  the  cost  of  transportation 
of  securities  to  Brussels  being  alone  charged  to  the  deposi- 
tors. Ordinary  deposits  made  by  the  same  organizations 
shall  be  kept  by  the  Bank  at  the  usual  scale  of  prices, 
the  expenses  of  the  first  shipment  of  securities  for  account 
of  a  mutual  benefit  society  being  borne  by  the  Bank. 

Chapter  IV. — Balance  sheet   and  distribution    of  profits. 

Art.  41.  On  June  30  and  on  December  31  of  each  year 
the  council  of  administration  shall  draw  a  balance  sheet. 

Within  the  twenty  days  following  each  semiannual 
balance  is  submitted  to  the  council  of  censors,  who  have 
twenty  days  to  examine  it. 

The  approval  of  the  balance  sheet  by  the  council  of 
censors,  by  a  majority  of  at  least  five  votes,  is  equivalent 
to  a  release  of  responsibility  for  the  directors.  In  case 
of  refusal  to  approve,  the  general  assembly  decides. 

Art.  42.  The  expenses  of  management,  corporate  out- 
lays of  all  kinds,  and  sinking-fund  payments  are  all  de- 
ducted from  the  gross  profits  in  order  to  draw  the  balance. 

There  must  also  be  deducted,  if  there  be  occasion,  the 
allowances  to  be  made  to  the  State,  to  wit: 

I.  The  profit  resulting  from  the  difference  between 
interest  at  3^^  per  cent  and  the  rate  of  interest  collected 
through  operations  of  discount  and  loans. 

224 


National       Bank       of      Belgium 

2.  One-quarter  of  i  per  cent  each  half  year  on  the  ex- 
cess of  the  average  circulation  of  notes  above  275,000,000 
francs. 

Art.  43.  The  net  profit  shown  in  the  balance  sheet  is 
apportioned  as  follows: 

1.  To  the  shareholders,  a  first  dividend  of  2  per  cent. 

2.  To  the  pubhc  treasury,  one-quarter  of  the  excess. 

3.  To  the  reserve  fund,  10  per  cent  of  the  same  excess. 

4.  To  the  council  of  administration,  4  per  cent,  and  to 
the  censors  i  per  cent  of  the  same  excess. 

5.  To  the  shareholders,  the  remainder  as  a  second 
dividend. 

However,  there  shall  be  levied  on  this  second  dividend 
a  sum  not  exceeding  25  centimes  per  share  in  each  half 
year,  which  shall  be  applied  by  the  council  of  adminis- 
tration to  charitable  purposes. 

Art.  44.  The  profit  accrued  to  the  shareholders  for 
the  first  half  year  is  distributed  in  one  payment  on  the 
ist  of  September  of  the  current  year,  and  the  profit  for 
the  second  half  year  on  the  ist  of  March  of  the  ensuing 
year. 

Art.  45.  Should  the  half-yearly  profit  to  be  distributed 
to  the  shareholders  be  less  than  2  per  cent,  the  amount 
shall  be  made  up  by  drawing  on  the  reserve  fund. 

This  deduction  shall  be  restored  to  the  reserve  in  the 
ensuing  half  year  if  it  can  be  done  without  reducing  the 
profits  to  be  distributed  to  an  amount  less  than  2  per  cent. 

Art.  46.  The  balance  sheet  and  profit  and  loss  account 
of  the  half  year  shall  be  published  at  the  end  of  each  period 
in  the  Moniteur  Beige. 

The  balance  sheets  and  the  profit  and  loss  accounts  for 
both  half  years,  as  well  as  the  reports  of  the  administra- 
85519—01 IS  225 


National     Monetary     Commission 

tion  and  of  the  censors  on  the  operations  for  the  year,  are 
printed  and  forwarded  to  the  shareholders  at  least  five 
days  before  the  ordinary  meeting  of  the  general  assembly 
in  the  month  of  February. 

Art.  47.  The  management  forwards  every  week  to  the 
Minister  of  Finance  a  statement  showing  the  condition 
of  the  institution  and  of  its  agencies  on  the  preceding 
Thursday. 

These  statements  are  pubhshed  in  the  Moniteur. 

Chapter  V. — Management. 

Section   i  . — Fundamental  provisions. 

Art.  48.  The  management  of  the  Bank  is  in  the  hands 
of  a  governor  and  six  directors,  forming  together  the  coun- 
cil of  administration. 

The  Bank  is  supervised  by  a  board  of  censors  composed 
of  seven  members. 

There  shall  also  be  a  board  of  discount. 

Art.  49.  The  governor  is  appointed,  and  may  be  dis- 
missed or  suspended  by  the  King. 

The  appointment  is  made  for  five  years;  it  may  be  re- 
newed without  limit  for  the  same  term. 

Suspension  can  not  exceed  three  months. 

Art.  50.  The  governor  is  required  to  reside  in  Brussels. 
His  salary  is  fixed  by  the  King  and  paid  by  the  Bank, 
which,  moreover,  makes  provision  for  a  residence  and  the 
furnishing  of  the  same. 

Art.  51 .  The  governor  shall  not,  during  the  continuance 
of  his  functions,  be  a  member  of  either  branch  of  the  Leg- 
islature, or  receive  a  pension  paid  by  the  State. 


226 


National       Bank       of      Belgium 

A  member  of  either  House,  when  appointed  governor, 
ceases  at  once,  in  case  of  his  acceptance,  to  be  a  member 
of  the  Legislature. 

When  a  governor  is  elected  a  member  of  either  Chamber, 
he  is  not  permitted  to  take  the  oath  as  such  until  he  has 
declared  that  he  chooses  the  latter  office. 

Art.  52.  Directors  are  elected  by  the  general  assembly 
for  six  years.     They  are  always  reeligible. 

They  must  be  Belgians,  native  or  naturalized. 

They  are  bound  to  reside  within  the  Brussels  district. 
Their  salary  is  fixed  at  6,000  francs. 

Art.  53.  One  of  the  directors  retires  from  office  on  Jan- 
uary I  in  each  year. 

A  director  elected  to  take  the  place  of  a  director  who 
is  deceased  or  has  resigned  completes  the  term  of  the  one 
he  replaces. 

Art.  54.  The  King  appoints  the  director  who  is  called 
upon  to  fill  the  place  of  the  governor  in  case  of  absence, 
disability,  or  suspension. 

This  director  takes  the  title  of  vice-governor  and  re- 
ceives an  annual  allowance  of  3,000  francs. 

Art.  55.  The  governor,  or  the  director  who  fills  his 
place,  may  give  power  of  attorney  for  current  business  to 
one  or  more  of  the  directors. 

The  conditions  of  such  delegation  of  authority  are  de- 
termined by  the  regulations  for  internal  government. 

Art.  56.  The  governor  and  the  directors  can  not  be  on 
the  board  of  any  other  bank. 

Art.  57.  The  board  of  censors  elects  from  its  own  num- 
ber its  president  and  secretary. 

Art.  58.  Censors  are  elected  by  the  general  assembly 
for  a  term  of  three  years  and  may  be  reelected. 

227 


National     Monetary     Commission 

Their  functions  cease  after  the  general  assembly  in 
February. 

They  retire  from  office  by  series,  one  of  three  members, 
the  other  two  of  two  members. 

The  second  paragraph  of  article  53  applies  to"  the 
censors. 

Art.  59.  Before  entering  office  the  governor  must 
qualify  as  owner  of  50  registered  shares,  each  of  the 
directors  as  owner  of  25  shares,  and  each  censor  as  owner 
of  10  shares. 

These  shares,  pledged  as  a  guaranty  for  their  adminis- 
tration, can  not  be  transferred,  and  can  only  be  released 
to  their  owners  after  approval  of  the  balance  sheets  for 
the  year  in  which  their  administration  ceases. 

The  fact  that  these  shares  are  applied  as  surety  bonds 
is  mentioned  on  the  records  and  on  the  certificates. 

Art.  60.  The  governor,  the  directors,  and  the  censors 
do  not  incur  any  personal  liability  by  reason  of  the 
Bank's  engagements;  they  are  responsible  only  for  the 
performance  of  their  duties. 

Art.  61.  If  the  share  in  the  half-yearly  profits,  allowed 
in  pursuance  of  article  43,  exceeds  80,000  francs  for  the 
directors  and  17,500  francs  for  the  censors,  the  general 
assembly  shall  have  the  power  to  decide  that  such  share 
be  reduced  to  said  figures. 

Art.  62.  The  secretary  and  the  treasurer  are  appointed 
by  the  general  coiuicil,  which  shall  have  power  to  dismiss 
them. 

The  regulations  for  internal  government  determine  the 
duties  pertaining  to  their  offices. 


228 


National       Bank      of      Belgium 

Section  2. — The  governor. 

Art.  63.  The  governor  presides  over  the  council  of 
administration,  the  general  council,  and  the  general 
assembly. 

He  attends  to  the  execution  of  their  decisions. 

He  presents  to  the  general  assembly  the  statements 
prepared  by  the  council  of  administration. 

He  watches  over  the  observance  of  the  fundamental 
laws  of  the  Bank,  the  statutes,  and  the  regulations. 

He  releases  recorded  mortgages,  after  being  authorized 
thereto  by  the  board  of  directors,  without  having  to  justify 
the  payment. 

Actions  at  law  are  brought  by  him  in  the  name  of  the 
management. 

In  conformity  with  the  decisions  of  the  directors,  he 
signs  agreements,  transactions,  and  documents  of  all 
kinds. 

Documents  binding  the  Bank,  other  than  routine 
papers,  should  be  countersigned  by  the  secretary. 

Art.  64.  The  governor  may  suspend  the  carrying  out 
of  decisions  of  the  council  of  administration,  in  order  to 
submit  them  to  the  general  council,  which  for  this  purpose 
shall  be  summoned  immediately. 

He  suspends  and  reports  to  the  Government  every 
decision  which  would  be  contrary  to  the  law,  to  the  stat- 
utes, or  to  the  interests  of  the  State. 

If  the  Government  does  not  take  action  within  fifteen 
days  from  the  time  of  such  report,  the  decision  may  then 
be  carried  out. 


229 


National     Monetary     Commission 

Section  3. — The  council  of  administration. 

Art.  65. — The  council  of  administration  passes  upon 
all  transactions,  excepting  those  regulated  by  the  laws, 
the  statutes,  and  the  regulations  for  internal  management. 

It  determines  the  rate  and  conditions  of  discount  and 
the  amount  to  be  applied  to  the  discount  of  treasury- 
bonds,  to  loans  on  state  bonds,  and  to  purchases  thereof, 
all  subject  to  the  approval  of  the  council  of  censors. 

It  appoints  and  dismisses  employees,  determines  their 
salaries,  and,  if  necessary,  the  amount  of  their  surety  bond. 

It  designates  those  who  may  receipt  for  payments  or 
deposits  or  settle  bills  receivable. 

It  may  give  power  of  attorney  for  acts  or  documents  to 
be  signed  outside  of  Brussels. 

It  proposes  names  for  the  appointment  of  agents  of  the 
cashier  for  the  State,  and  determines  their  salaries  and 
the  amount  of  their  surety  bond. 

It  has  the  right  to  compromise  and  arbitrate,  after  con- 
sultation with  the  council  of  censors. 

It  makes  reports  to  the  general  assembly  on  the  trans- 
actions of  the  Bank. 

Art.  66.  The  board  can  not  deliberate  unless  a  majority 
of  its  members  is  present. 

Resolutions  are  passed  by  a  majority  of  votes.  In  case 
of  even  division,  the  vote  of  the  president  prevails. 

Art.  67.  Minutes  are  kept  of  the  deliberations.  Men- 
tion is  made  therein  of  the  nature  of  transactions,  of  their 
object,  and  summarily  of  the  reasons  for  the  decisions 
reached. 

The  minutes  are  signed  by  all  the  members  present  and 
by  the  secretary. 

230 


National       Bank       of      Belgium 

Section  4. — The  council  of  censors. 

Art.  68.  The  censors  have  the  right  to  supervise  all 
operations  and  to  have  all  records  exhibited  to  them. 

They  examine  and,  if  there  is  occasion,  approve  the 
balance  sheets  and  vote  on  the  amount  of  expenditures  on 
the  proposals  made  by  the  council  of  administration. 

The  following  matters  are  submitted  to  the  board  of 
censors : 

Decisions  of  the  council  of  administration  changing  the 
rate  and  conditions  of  discount;  the  amount  of  treasury 
bonds  to  be  admitted  for  discount;  and  the  terms  for  loans 
on  state  bonds  and  other  securities  guaranteed  by  the 
State,  as  well  as  decisions  determining  exchange  charges 
and  the  investments  to  be  made  in  public  funds. 

Nevertheless,  in  case  of  necessity,  the  council  of  admin- 
istration may  change  the  rate  of  discount,  its  decisions  to 
be  submitted  within  five  days  to  the  censors  for  their 
approval. 

Art.  69.  The  council  of  censors  meets  at  least  once  a 
month. 

It  can  not  deliberate  unless  at  least  four  of  its  members 
are  present. 

Resolutions  are  carried  by  a  majority  of  votes.  If 
evenly  divided,  the  matter  in  question  is  referred  to  the 
general  council  for  decision. 

If  a  quorum  of  the  censors  is  not  present,  the  general 
council  may  take  action  in  case  of  emergency. 

Art.  70.  One-half  of  the  share  in  the  profits  assigned  to 
the  censors,  in  pursuance  of  paragraph  4  of  article  43,  is 
distributed  in  fees  for  attendance. 


231 


National     Monetary     Commission 

Section  5. — TJic  general  council. 

Art.  71.  The  governor,  the  directors,  and  the  censors 
form  the  general  council. 

Art.  72.  The  general  council  meets  at  least  once  a 
month  for  the  purpose  of  considering  the  condition  of  the 
Bank. 

It  passes  upon  all  matters  submitted  to  it  in  accordance 
with  either  the  statutes  or  the  regulations  for  internal 
management. 

It  determines  definitively  concerning  the  distribution  of 
profits. 

It  determines  the  conditions  on  which  deposits  are  re- 
ceived ;  but  these  conditions  are  submitted  to  the  Minister 
of  Finance  for  approval. 

On  proposals  made  by  the  council  of  administration,  it 
decides  upon  the  regulations  for  internal  management,  as 
well  as  upon  the  general  regulations  concerning  the  organ- 
ization of  branches,  discount  offices,  and  agencies.  All 
these  regulations  are  submitted  to  the  Minister  of  Finance 
for  approval. 

It  considers  proposals  for  opening  branches,  discount 
offices,  and  agencies  in  the  country,  on  their  form  of  organ- 
ization, and  on  all  matters  relating  to  the  issue  of  bank 
notes. 

It  fixes  salaries  and,  if  necessary,  the  amount  of  surety 
bonds  of  the  secretary  and  of  the  treasurer. 

Art.  73.  Except  in  the  case  provided  for  in  the  last 
paragraph  of  article  69,  no  deliberation  can  take  place  in 
the  general  council  unless  a  majority  of  the  members  of 
the  council  of  administration  and  of  the  council  of  censors 
are  present. 

232 


National       Bank       of      Belgium 

Decisions  are  carried  by  a  majority  of  the  votes  cast. 
In  case  of  even  division,  the  president  has  the  deciding 
vote. 

Section  6. — Discount  committee. 

Art.  74.  The  discount  committee  at  the  head  office  of 
the  Bank  is  composed  of  two  sections  of  at  least  three 
members  each,  appointed  by  the  general  council,  which 
determines  upon  their  fees  for  attendance. 

They  may  be  chosen  among  the  censors. 

One-half  the  committee  is  renewed  every  year,  but  the 
members  whose  terms  have  expired  are  reeligible. 

Art.  75.  The  days  and  hours  of  meeting  of  each  section 
are  fixed  by  a  special  regulation. 

Each  section  is  presided  over  by  a  director.  It  exam- 
ines the  paper  submitted  and  presents  to  the  directors 
the  bills  which  fulfill  the  required  conditions. 

Chapter  VI. — Government  commissioner. 

Art.  76.  The  commissioner  of  the  Government  watches 
over  the  operations  of  the  Bank  and  especially  discounts, 
the  issue  of  notes,  and  the  investment  of  the  available 
funds  of  the  treasury. 

His  salary,  fixed  by  the  King,  by  agreement  with  the 
directors  of  the  Bank,  is  paid  by  the  latter. 

Art.  77.  The  commissioner  of  the  Government  has  the 
right  at  all  times  to  examine  into  the  condition  of  affairs, 
and  to  verify  the  books  and  the  cash. 

The  directors  are  bound  to  furnish  him,  whenever 
required  by  him,  a  report  on  the  Bank's  condition,  cer- 
tified to  be  correct. 


233 


National     Monetary     Commission 

Art.  78.  The  commissioner,  whenever  he  deems  it 
proper,  may  be  present  at  the  meetings  of  the  general 
assembly,  of  the  councils,  and  of  the  committees. 

He  has  the  right  of  discussion,  without  the  right  of 

voting. 

Chapter  VII. — General  assemblies. 

Art.  79.  The  general  assembly  represents  the  aggre- 
gate of  the  shareholders. 

Its  decisions,  when  regularly  reached,  are  obligatory 
even  upon  the  absent  or  dissenting  members. 

Art.  80.  The  general  assembly  is  composed  of  share- 
holders, owners  of  ten  registered  shares,  which  have  stood 
in  their  name  for  at  least  twenty  days,  or  of  ten  shares  to 
bearer  deposited  either  in  the  head  ofi&ce  or  in  the  agen- 
cies designated  by  the  board  of  directors. 

A  shareholder  can  not  appoint  anyone  to  represent 
him,  except  a  party  who  is  himself  entitled  to  vote. 

Societies,  companies,  and  corporations  may,  however, 
be  represented  by  a  member  chosen  for  that  purpose; 
and  minors  or  persons  under  guardianship  are  legally 
represented  by  their  guardians  or  trustees. 

Powers  of  attorney  and  other  documents  proving  the 
right  to  be  present  at  the  general  assembly,  in  accordance 
with  the  two  preceding  paragraphs,  must  be  remitted  to 
the  Bank  at  least  three  days  before  the  meeting.  They 
must  be  signed  by  the  parties  presenting  them. 

Art.  81.  Before  the  meeting  opens,  the  shareholders 
sign  their  names  to  the  presence  list. 

Art.  82.  Ten  shares  give  the  right  to  one  vote. 

No  one  can  have  more  than  five  votes  as  shareholder 
and  five  votes  as  attorney  for  others,  whatever  may  be 
the  number  of  his  principals. 

234 


National       Bank       of      Belgium 

Art.  83.  The  ordinaty  meetings  of  the  general  assem- 
bly take  place  on  the  last  Monday  of  February-  and  the 
last  Monday  in  August. 

It  passes,  if  necessary,  upon  the  balance  sheet  of  the 
preceding  half  year,  in  the  case  provided  for  by  article  41 
of  the  present  statutes. 

At  the  February  meeting  the  administration  reports  on 
the  operations  for  the  year  ending  December  31  preceding. 

At  the  August  meeting  it  elects  the  director  and  the 
censors  to  take  the  place  of  those  whose  terms  expire  at 
the  end  of  the  year. 

At  either  of  these  meetings  it  may  fill  vacancies  caused 
by  death,  resignation,  or  otherwise. 

Art.  84.  The  general  assembly  may  be  convoked  for  an 
extraordinary  meeting  whenever  the  council  of  adminis- 
tration considers  it  expedient. 

It  must  be  called — 

1.  When  the  meeting  is  required  either  by  the  board  of 
censors,  or  by  not  less  than  20  shareholders  having  the 
right  to  vote. 

2.  When  the  number  of  directors  or  the  number  of  cen- 
sors is  reduced  to  four. 

Art.  85.  The  meetings,  either  ordinary  or  extraordi- 
nary, are  called  at  least  fifteen  days  in  advance,  by  regis- 
tered letters  sent  to  the  registered  shareholders  having  the 
right  to  vote  and,  further,  by  publication  in  the  Moniteur 
and  in  two  of  the  principal  daily  papers  of  Brussels,  one 
mionth  before  the  day  of  the  meeting. 

If  the  general  council  decides  that  there  is  urgency,  tliis 
latter  delay  may  be  reduced  to  fifteen  days. 

In  any  case  these  notices  must  mention  the  time  when 
shares  to  bearer  can  be  deposited. 

235 


National     Monetary     Commission 

Art.  86.  All  notices  of  meetings  must  state  the  subjects 
on  which  the  assembly  shall  or  may  be  called  to  deliberate. 

Art.  87.  The  two  largest  shareholders  present,  who  are 
not  members  of  the  administration  and  are  willing  to  act, 
shall  be  tellers  of  election. 

They  sign  the  minutes  with  the  president  and  the  mem- 
bers of  the  council  of  administration. 

Art.  88.  The  general  assembly  deliberates — 

1.  On  the  matters  mentioned  in  the  notices,  and  which 
are  placed  before  them  either  by  the  council  of  administra- 
tion or  the  council  of  censors. 

2.  On  propositions,  signed  by  five  members,  which  shall 
have  been  transmitted  to  the  council  of  administration  at 
least  ten  days  before  the  meeting,  to  be  placed  on  the  order 
of  the  day. 

If  the  assembly  recognizes  the  importance  of  other 
propositions  made  by  the  council  of  administration,  they 
may  be  taken  under  consideration. 

Art.  89.  Each  resolution  must  be  decided  by  a  ma- 
jority vote.  In  case  of  even  division,  the  proposition  is 
rejected. 

Art.  90.  Elections  or  revocations  are  made  by  secret 
ballot.  On  all  other  propositions  and  subjects  the  voting 
is  done  by  yeas  and  nays. 

Art.  91.  If,  on  a  first  ballot,  the  candidates  have  not 
all  obtained  an  absolute  majority,  a  list  is  made  of  those 
who  have  obtained  the  most  votes. 

Such  list  shall  contain  twice  as  many  names  as  there 
remain  members  to  be  elected. 

Votes  can  then  be  given  only  to  one  of  these  candidates. 

In  all  cases  where  there  is  a  tie  the  older  man  is  elected. 


236 


National       Bank       of      Belgium 

Art.  92.  The  dismissal  of  directors  or  censors  can  be 
effected  only  by  three-quarters  of  the  votes  of  shareholders 
present,  owning  at  least  one-half  of  the  stock. 

Chapter  VIII. — General  and  temporary  provisions. 

Art.  93.  No  change  in  the  statutes  can  be  made  except 
in  a  general  assembly  speciall}^  convened  for  that  purpose. 

The  object  of  the  proposed  modifications  must  be 
stated  in  the  letters  and  notices  of  meeting. 

The  assembly  can  not  legally  act  if  the  number  of 
shares  represented  is  not  at  least  20,000. 

The  owners  of  less  than  10  shares  may,  in  such  cases, 
combine  them,  in  order  to  be  represented  by  shareholders 
having  the  right  to  vote. 

Resolutions,  in  order  to  be  carried,  must  be  supported 
by  at  least  two- thirds  of  the  votes. 

They  shall  not  be  operative  unless  approved  by  the 
Government. 

Art.  94.  Independently  of  the  rights  granted  to  the 
Government  in  the  present  statutes,  it  may  resist  any 
measure  which  it  considers  either  contrary  to  the  laws,  to 
the  statutes,  or  to  the  interests  of  the  State. 

Art.  95.  The  present  governor,  the  directors,  and  the 
censors  continue  to  hold  their  offices. 

These  statutes  in  no  way  interfere  with  the  limit  of  tlic 
governor's  tenure  of  office,  nor  with  existing  arrangements 
for  the  tenure  of  directors  and  censors. 

Art.  96.  The  balance  sheet,  as  well  as  the  profit  and 
loss  account  for  the  first  half  year  1900,  shall  be  prej^arcd 
in  accordance  with  the  present  statutes. 

These  statutes,  as  regards  other  provisions,  shall  lake 
effect  June  i,  1900. 

237 


National     Monetary.    Commission 

Additional  Article. 

The  difference  for  the  year  1899  between  the  sum  due 
the  State,  according  to  the  law  of  March  26,  1900,  and 
that  to  which  it  was  entitled,  according  to  previous  agree- 
ments, shall  be  paid  out  of  the  reserve  fund. 

The  sum  thus  withdrawn  from  the  reserve  shall  be 
restored  to  it  by  means  of  levies  on  subsequent  years. 

The  general  council  shall  determine  the  time  and  the 
amount  of  each  restitutions. 


238 


UNIVERSITY  OF  CALIFORNIA   AT  LOS  ANGELES 

THE  UNIVERSITY  LIBRARY 

This  book  is  DUE  on  the  h\st  date  stamped  below 


V^ 


.N^^V 


QFoc  10^989 


Form  L-9-20m-8,'37 


HG 
3106 
C74n 

Conant   - 
The  National 

U*«wy  d  Ctttona.  Los  Angelas 

Danic  oi 
Belsi-om. 

L  005  462  577  7 

HG 
3106 
C74n 


CALIFC 


UC  SOUTHERN  REGIONAL  LIBRARY  FACIL 


AA    001  108  690    7 


